Just because Vancouver is expensive, does that make it a luxury world city?
Luxury is an evocative word, but in real estate, defining “luxury” is a daunting task. It’s not only about the expense, it’s also about prestige and uniqueness. Luxury is a matter of perception – both in terms of ourselves and our sphere of influence.
Vancouver, when comparing average housing costs and average household incomes, is one of the most expensive cities to live in the world, but this doesn’t necessarily make it a luxury destination.
Think of famously luxurious places to live – such as 5th Ave in New York, the Champs Elysees in Paris, Mayfair in London, or Monaco on the Mediterranean.
Is Vancouver among those destinations, or headed that way? Are we becoming one of the top cities for luxurious living?
Let’s review the strengths and weaknesses Vancouver presents as a luxury city.
Low crime, great education, cleanliness and social cohesion are the foundations for a pleasant day-to-day life. Vancouver has all of these and is ranked the third-most livable city in the worldby the Economist for the seventh year in a row (and before that it was in top place for seven years).
Also, when you can enjoy winter sports after work during the winter and stroll on the beach in the summer, you know you are in a good place.
Vancouver’s location also makes it suitable for a quick getaway in the US or within beautiful British Columbia, like Tofino or the Okanagan wine region.
Regarding the entertainment and food scene, Vancouver is certainly soft-spoken but delivers multiple great restaurants and quality food, as well as film festivals, theatre, music and art exhibitions. We don’t have a Fashion Week, but we do have many innovative brands emerging from our city.
As for weaknesses within the global luxury destination criteria, our weather plays a role. Vancouver is well-known for its rain – although when you look at places like London and New York, we can see that luxury doesn’t always have to be linked to great weather (although it does help).
The city also lacks the large corporate headquarters and high-paying jobs that we see in places such as New York or other major cities, which have industries like banking, pharmaceutical, advertising, IT, etc. Vancouver is growing as a tech centre, but this is still relatively small compared with other major world cities, as is its movie and TV industry.
Another major weakness in terms of attracting high-net-worth individuals is our tax structure. Not only because of the 39.6% income tax for the top-income bracket, but also if you have a vacation property that is empty more than six months of the year, then you will need to pay a 1% vacancy tax. For a $5 million home, you pay $50,000 a year. That is certainly a lot.
And then, of course, there’s the foreign buyer tax.
The chart below from the Real Estate Board of Greater Vancouver shows that since the implementation of the 15% foreign buyer tax in August 2016, the monthly dollar volume spent on homes sold for above $988,000 decreased by 20%, from $4 billion to $3.2 billion.
If the foreign buyer tax didn’t do much to help the middle classes afford homes, it certainly hit the luxury market by scaring away affluent foreign nationals and their investments.
Where Are We Headed?
Vancouver, as wonderful and livable as it is, it is drifting away from the top luxury destinations in the world – mostly because of our taxes and a reputation for rainy weather – with the 1% elite preferring New York, Los Angeles, Monaco, Hong Kong, London, Paris, etc.
But we are in an ever-changing world, and Vancouver may well become more widely seen as the “paradise on earth” that most of its residents already see – and, if that happens, it will become even more expensive.
Right now, however, Vancouver is officially one of the best places to live on Earth, and despite being pricey in comparison with local incomes, it is far from being the most expensive in terms of average real estate prices. This means that Vancouverites can, for now, still enjoy a luxurious place at a lower cost than many world cities.
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