Nowhere was optimism in the future of the province’s real estate industry better seen following the May 14 election than when Bob Rennie took the podium at the Urban Development Institute’s luncheon in Vancouver on May 16 to the strains of Sam Cooke’s “Having a Party.”
If experience is any guide, Rennie fully expects baby boomers—who sit on about $88 billion worth of property—to continue fueling Lower Mainland real estate sales activity.
While resale activity remains sluggish, Rennie regaled the UDI with a string of projects coming to market in the coming months and offered a glimpse of what lies ahead for the next 15 years.
It offered some contentious stats chewed over in chatter following his presentation.
Two-thirds of all sales in Metro Vancouver since 2006 were to existing homeowners, Rennie said, arguing that those buyers were using accumulated equity rather than being dependent on down payments and ongoing income.
Moreover, those same buyers are funding property purchases by their children and grandchildren. Rennie’s surveys of buyers show that 30% to 40% of first-time buyers at recent projects cited parents and grandparents among their financiers.
“So … 70% to 75% of our market is not solely relying on incomes to purchase,” Rennie said. “This helps me to understand why it all keeps working.”
While critics of affordability levels in Vancouver keep pointing to income levels, the figures—in Rennie’s opinion—suggest that incomes play a far smaller role in the market than many claim.
“Our buyers are just trading equity, not relying on their income,” he said.
More quotes from Bob Rennie’s speech to the Urban Development Institute:
“In British Columbia only 4.9 per cent of us earn over $100,000 a year. Only .6 per cent of our population earn over $250,000 a year…. Then we have 67% of British Columbians earning under $50,000 per annum…. And I think when you look at that division of 4.9 earning over 100 and 65 earning under 50 you can see why we garner the title of the most expensive place to live on earth… if that statement was only based on income.”
“The feds, Flaherty and the banks have a really hard time understanding the Greater Vancouver marketplace. They are asking, ‘How does a $50,000 a year income find a $75,000 down payment? Where are the 20% down payments coming from?’”
“The high end of our market, to me, falsely skews all the statistics, alters opinions and labels us as the most expensive…. The top 20 per cent of residential cause CMHC, banks and Flaherty to pre-judge our markets and put in very restrictive trade practices.”
“We’ve already established that we’re not a financial centre, we’re not a head-office city, and 67 per cent of us earn less than 50,000 per year, so we still have to find out why we defy the economists and we have to ask ourselves, ‘Who are the 67 per cent?… are they sustainable?’”
“The baby boomer in 15 years will be 64 to 81 years old, and those 56-to-75-year-olds sitting on $88 billion, they’ll be 71 to 90 years old. They’re selling their homes and 100 per cent of them will not be buying up. They also promised their children and their grandchildren that the house money will look after all of us and now the house sale is needed to maintain their lifestyle and health care.”
“Watch as our markets really split out to what the parents’ and the grandparents’ housing needs are and the first-time buyers’ needs are. But you have to understand, it’s two markets, one chequebook.”
“In greater Vancouver, 590,000 people will move here over the next 15 years. Five hundred and ninety thousand is like another city being absorbed into Greater Vancouver over the next 15 years.
“Net immigration will average 37,000 over the next 15 years. You start to see the formation of home buyers that cause sustainable markets when you have 37,000 people moving in a year for fifteen years.”
The full speech is here: