Providing Thoughtful Analysis on the Housing Market
Silence. There are no elephants in this room. And ignore the smell.
I'll put it in old school farmer's lingo, “pigs don't know that pigs stink”.
the article points out geographical constraints as being a major influence. This applies to every part of the GVRD with perhaps the exception of the Fraser Valley. The mortgage bond & teaser rate situation in the US between 2005-2007 played a role as well. Can the same be said for our own situation in Canada? I highly doubt it. As much as I'd like to find a bargain house in Vancouver it's likely a pipe dream until boomers start becoming too old to take care of themselves & start to sell en masse.
CR mentions upward sloping real prices in regions increasing land utility, but this is because of rational expectations of rental growth either from gentrification (rising real incomes) or redevelopment. CR has taken flack for the assertion that price/rent can remain on an upward slope for an extended period. I might write a bit more on this at some point.Condos should provide a decent gauge of income growth because redevelopment potential is close to zero. On that front rents have not been increasing that much in years, and 2011 isn't looking strong at all on this front...
I don't think anyone expects prices in Vancouver to be equal to Atlanta, GA but a healthy correction bringing prices in line with a reasonable price / rent ratio is expected. Many areas in the US with more severe geographical constraints and better economies have seen sizable corrections in prices, albeit not as severe as those places where geography does not play as much of a role.
Geographical constraints may justify a higher price/rent for SFH (future densification) but there are no constraints at all on condos. We're not running short on airspace any time soon.Condo prices are approaching three times what is justified by rent, which means SFH are also greatly overvalued given any reasonable price/rent premium for the former.As to what a reasonslble price/rent might be for SFH in a city with land constraints, check out San Francisco City. Far lower than in Vancouver today. So is New York City for that matter.
"As to what a reasonslble price/rent might be for SFH in a city with land constraints"I'm not sure about property taxes; high taxes in SF/NYC would justify lower prices.
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