Prevailing expectations of many home buyers in Vancouver that they should be able to have a large home in a central location are “not really entitled, just youthful and naïve” compared with buyers in other, more-established global cities, according to celebrity REALTOR® Todd Talbot.
Speaking in a Q&A session with REW.ca ahead of the Vancouver Home + Design Show, at which he is presenting two sessions, the co-host of HGTV Canada's hit show Love It or List It Vancouver offered his advice to buyers and his thoughts on the current market and recent regulatory changes.
REW: What are your recommendations to first-time buyers trying to get into the market?
Todd Talbot: First-time buyers, especially those who have grown up in a detached home in Vancouver, often have grandiose ideas about how their first home will look. The idea of sacrifice, and of short-term pain for long-term gain, applies to real estate. We don’t have to have everything right off the bat. I mean, I’m 43 and I only had my first ensuite six months ago – and I’m in the industry and do well for myself!
It’s very interesting when you see how people in other cities view real estate, compared with here in Vancouver. Here it feels like everyone wants a 33-by-122-foot lot and a back yard, five to 10 minutes from downtown. The reality of being able to get that has changed, but many people in the community haven’t fully come to terms with that yet.
There’s a shift in how we need to think about the spaces that we live in. In Vancouver we haven’t yet embraced that, whereas in places like London, this reality is totally accepted. If you live a 40-minute drive outside of London, you’re thrilled.
You come back to Vancouver, and listen to the conversation, and it’s not so much about entitlement, necessarily, but more that it is a very youthful, naïve way of thinking – it’s how we used to think – because Vancouver is such a young city. We’re going through an evolution of how we look at real estate in this region.
REW: Many buyers with limited finances – especially with the new mortgage qualification rules in place – will have to adjust their expectations. Should they prioritize buying a central but smaller or less luxurious home, or a larger home further out of town?
TT: Generally I’d advise first-time buyers to stay as close as possible to the core – wherever that may be – and adjust the space and the creature comforts of what they want to buy. That’s my preference over recommending people look further out of town. Generally, if there’s a price adjustment, it happens from the outside inwards.
The way to look at it is in two ways. You are both the landlord and the tenant – that’s how you have to think about it. So, as the landlord, adjust your mentality to buy something that you think will increase in value in the long term, so therefore, it’s better to be closer to the urban core.
You don’t need in-suite laundry and granite countertops. Prioritize location, dial back on the wish list and put in some sweat equity if you need to make improvements.
REW: What’s your recommendation to people who are unsure of whether to buy a home, or what to buy?
TT: It’s tricky when you’re trying to predict the market, especially if you’re a first-time buyer who doesn’t have much experience. It’s important to build a team around you who you can trust, including a recommended REALTOR® and a mortgage broker, as they are the ones who have a deep knowledge and understanding and can advise you. Although they should also have the humility to know that they can’t predict the future.
The other side of it is about taking responsibility for your decisions. A lot of people, if they don’t know much about real estate, will almost defer all responsibility to their agent or broker. It’s really important that buyers gather as much information as they can and keep asking questions until they’re absolutely clear on what’s happening and can make an educated decision that they can stand behind, responsibly. And part of that is not rushing a decision. Be in the process long enough so that your instincts are strong.
REW: What about buyers who are trying to get as large a mortgage as possible, in order to afford a liveable home in Vancouver?
TT: Don’t get into a position where you are so heavily leveraged that any shift in the mortgage rate is going to significantly affect your monthly budget. There are safeguards you should put in place, it’s important to have an out. Yes, it’s always a stretch when you first buy a home, and that’s OK, because we grow into that responsibility – but you will probably have to make sacrifices in the short term to make it work.
REW: What are your thoughts on the likely effects of the recent regulatory and taxation changes on the market?
TT: In the space of around 10 weeks, we’ve had three massive announcements thrown at our housing market [the foreign buyer tax, City of Vancouver's empty homes tax proposal and new federal mortgage rules], so it’ll be fascinating to monitor. Many won’t have the intended effect. With the new mortgage qualification rules, you’re squeezing out the lower end of the market. I’m not sure everyone’s clear on the full effect of such a move. This has the potential to be a significant double-edged sword. I understand that it’s intended to protect buyers, but what will it do to the market?
And then with the foreign buyer tax – a lot of people didn’t realize that the market was already slowing, and people assume that the turning point was the introduction of the foreign buyer tax, but that’s not true. Sure, the foreign buyer tax is also affecting sales now, but there’s no way of knowing to what extent. I also think this should be a national policy, not just for Vancouver – I think it’s not fair. And it should be the action – speculation – being targeted, rather than the nationality of speculators. I know speculators who are Canadian.
REW: What do you think about the way the real estate market is portrayed in local media, and the quality of the information that local people are receiving?
TT: Well, there’s a lot of use of fear-based words. And there are many comments that, although true, don’t apply everywhere. The condo market, for example, is still very strong. We have a responsibility to be more measured in our commentary. I try to be an advisor, a coach, and get people thinking.
There’s also a lot of talk about the “housing market bubble.” But the local conversation about housing market bubbles has been happening since I bought my very first place 15 years ago.
REW: How should buyers approach investing in a home in today’s market?
TT: We’ve had a tendency in Vancouver to think of our homes as a short-term commodity rather than a lifestyle choice, and we’ve seen such massive price growth, that it has lulled us into a false sense that this will continue. So when we’re not seeing that huge growth happening, it makes us really question the market. Buyers get caught up in that – they don’t want to be the ones to get burned. So lots of buyers are in a holding pattern right now, waiting to see what the market will do.
And that’s not a bad thing – it’s good to have your Spidey-senses aware of what’s going on in the market, and be cautious. If you are still subscribing to the idea that you’re going to realize double- or triple-digit gains over the next 12 months, you’re going to be disappointed.
If you’re looking at real estate how I look at it, from a long-term perspective, then I think you’re in a good position. I’m still a big believer in the fundamentals of the Greater Vancouver market and I like to take a big-picture view. I’m sitting here looking at this incredible view right now. Our political system is strong, our banking system is strong. In the long run, if you’re looking at buying a home to live in, there are now opportunities to capitalize on that.
Some buyers are now drifting back into the market, as it’s not as crazy as it was before. There’s now room to take your time when buying, to put subjects down, which should always be there – it gives buyers a chance to catch their breath.
And in 10 years from now, unless there’s a catastrophic turn of events, I guarantee you that Greater Vancouver will be even more sought-after than it is right now. People need to understand how much money there is in the world, and how many people are out there who want to buy real estate in places like Vancouver.
Todd Talbot will be speaking at the Vancouver Home +Design Show, running October 27-30 at the Vancouver Convention Centre West (info here). He will also be guesting live on the Real Estate Therapist radio show on Saturday October 29, 9-10am, on Roundhouse Radio 98.3FM and streaming on roundhouseradio.com. If you have any market questions or need home buying advice, Todd will respond on air – please email questions and issues to [email protected] or call the show live on 604-449-8983.
This interview has been edited and condensed.