As Lenny, my four-legged companion, and I were walking along 2nd Avenue (or 6th or 4th or whatever it’s called down there) close to the Olympic Village, we couldn’t help but notice all the construction cranes and commotion. It is as though buildings are popping up like mushrooms in the dog park. One week I’m getting my car serviced at the auto-body shop and the next week 250 luxury apartments take its place. That’s when Lenny looked up at me and asked, “How many new dogs are moving to this city? And will there be enough pooches to fill all these places?” Then he went back to chewing on his stick and hunting squirrels. But Lenny is as wise as he is hungry, and he got me thinking. With at least 10 buildings under construction and only 60% of the Olympic Village sold, are we in for a surplus of unsold inventory? I called my friend Cameron Muir (Chief Economist for the BCREA) and he started crunching the numbers.
Over the past 5 years an additional 286,000 people have made BC home with the majority landing in Vancouver. This equates to roughly 35,000 immigrants a year moving to Metro Vancouver. The majority of these immigrants fall under the investor designation. Today, that means these households have a net worth of $1.6 million and have made a temporary investment of $800k in Canada. If we add in some inter-provincial migration, we soon realize that the busy bees erecting those towers can’t stop. They need to keep building in order to handle the flood of affluent, educated people looking to call “the Most Liveable City in the World” home.
Price is another interesting issue. Can the cost of Vancouver homes continue to rise? The rules of economics state that if demand is greater than supply, then prices should rise, and if supply exceeds demand, prices should drop. The West side of Vancouver isn’t adding any many more single family homes. Neither is the East side, the North Shore, or Delta. However, the people keep coming. Each municipality has realized they have to increase density in order to sustain population growth. This means going vertical - aka more construction. A typical downtown condo building has roughly 150 units which equates to about 250 people. Therefore, we will have to build roughly 140 towers a year in order to handle our current population growth.
So the next time you get a flyer advertising a new development, think about those 35,000+ people waiting at the airport and our land-locked city. Vancouver, they say, is a real estate anomaly, so maybe our best plan would be to embrace it and go for a walk. If you would like the company of a philosophical dog, then feel free to drop by the Blu Headquarters and pick up Lenny. He is always up for a walk & talk - rain or shine, in any market.