In recent years, Vancouver’s housing market has attracted a lot of attention. No, not for its natural beauty and the bountiful amenities. With a Multiple Service Listing Home Price Index (MPL HPI) of $1,046,900, this is Canada’s most expensive real estate market. Home and land prices have risen steadily over the past decade, making area real estate both inaccessible and a fantastic investment if you have the means. Here, we’re going to break down why, exactly, land costs so much in this part of the country.
Foreign buyers continue to be the largest drivers of Vancouver real estate. Wealthy foreign buyers, hailing primarily from China, are purchasing and investing in area property. David Lay, a geographer from the University of British Columbia, has found that, in the last 25 years, there has been an almost 1-to-1 correlation between Vancouver’s rising real estate prices and the surge in international immigration and offshore investors. Similarly, research from the University of Waterloo backs up Lay’s findings, conceding that Vancouver is an exceptional example of how globalization can significantly impact a local housing market. The accumulation and access to money experienced by these wealthy investors—much of whose money is earned outside of Canada—has led to the “decoupling of housing from local labor market participation,” according to the University of Waterloo study.
Ineffective regulation is a concomitant cause of this strange housing market. An investigation conducted by Globe and Mail found that, when Vancouver real estate agents were disciplined for wrongdoing, they often faced minimal fines and suspensions. Compared to the hefty commissions earned on massive real estate transactions, these fines are, to be frank, inconsequential. The investigation found the average fine of more than 100 disciplinary proceedings to be just short of $5,000. The potential commission on a $1.78-million home (the average price paid in metro Vancouver at the time of the investigation) is $22,500. As a result, many real estate agents see these disciplinary fines are part of the business process. To that end, the Globe and Mail investigation found that only a fraction of agents lost their licenses for misconduct.
These investment issues, coupled with a surplus of inexperienced and ill-trained realtors, has caused an insurmountable surge in the Vancouver housing market. There are currently more than 12,400 real estate agents in the Vancouver area—up more than 25% from 2012. Growth in the profession, along with errors and broken regulations, are due to the incredibly low bar of entry into the field. The Real Estate Board of Greater Vancouver (REBGV) states, “The No. 1 way to increase public protection is to have more than a 10-week online course to get your license.”
Of course, Vancouver’s real estate market is also tilted as a result of more standard, pedestrian reasons. The area is rich in natural beauty; nestled between the coast and the mountains, this part of the country’s rise in popularity can be likened to that of America’s Pacific Northwest. The city has a vibrant community and innovative amenities, making it an incredibly attractive place for potential homebuyers. If you are planning to purchase a home or land in the Vancouver area, be sure to do your research and understand the investment you are making.