Sitting Out

In 2002 Felicity Stone and Jim Patton stumbled onto the real-estate mother lode, trading up from a house in rural Langley to a thoughtfully designed home on two acres in the Elgin Chantrell area of South Surrey. Patton, a communications consultant, and Stone, who works in public relations, were happy to pour work and money into the place, expecting to live there the rest of their lives. Then their outlook began to change. Much as they loved the 1962 gem, they also saw what nearby property was selling for. In August 2007 they decided to list, and by November they’d accepted $1.616 million—a 240 percent increase from the $475,000 they’d paid a half-decade earlier. Now they’re renting a house in the Bayridge area of West Van, paying $2,500 a month while they watch the market and wait for prices to drop.

Add two more people to Vancouver’s rapidly growing crowd of real-estate bears—those who believe that the price escalation of recent years is about to be followed by an equally dramatic fall. On the various blogs and forums where the most committed spend many of their waking hours, the keening is almost palpable; news of price increases and condo sellouts is met with denial and derision for the saps and speculators who make the travesty possible; gleeful celebration accompanies every faltering-market signal or news item detailing further distress in American cities. Typical is this quote from Solipsist, on the Vancouver (Un)real Estate blog: “The collapse of the U.S. dollar and economy, and perhaps U.S. society? They are going down, and we, and a good part of the world will be going down with them.” Or, as General Zod writes on a blog maintained by local realtor Rob Chipman: “Price cuts and more price cuts… Foreclosures spike. All downhill from there, baby.” Spend time lurking in these dark places and you will become convinced that real estate, if not western civilization, is headed for the kind of vengeance and decay usually restricted to the Old Testament and William Gibson novels.

And indeed, there seems almost no way the bears can be wrong. In a city where fewer and fewer can afford to buy, and where investors complain that rents don’t come close to covering expenses, how can a rise of the magnitude Vancouver has seen over the past six years not be followed by an imminent fall? Especially when other markets, not just in the U.S. but around the world and even next door in Alberta, are also fading? A downturn seems inevitable—and this in a city where downturns have a history of being dramatic, if not catastrophic. Yet there’s still no hard evidence that a correction is under way or even around the corner. MLS statistics released in early February showed prices continuing their steady rise even as listings grew faster than sales (which is normal early in the year). In this gradually slowing but still robust market, multiple offers remain common and some homes sell above asking even as others endure price cuts or sit empty. In fact, the early days of 2008 proved as strong as those of 2007, a year that produced the 15 percent or so rise in average prices that seems to have become automatic.

This was no surprise to economists—generally regarded on the bear blogs as shills for the real-estate industry but nevertheless guilty of consistently underestimating the growth in prices. Relying on hard data rather than quiverings in the gut, they’ve sheepishly forecast yet another year of moderate increases. After all, the population continues to grow, land remains scarce, construction costs escalate, and affordability is actually improving, thanks to dropping interest rates. And wouldn’t you know it, despite all the bad news south of the border, Statistics Canada released figures in mid-February showing B.C. employment at a historic high.

So it’s not clear in what direction real estate is headed. What is clear is that dipping into the market requires extra vigilance. If—when?—real estate does plateau or drop, the strategies that have worked well in recent years will need to be rethought or, in some cases, reversed.



The 5 Most Important Things to Know in Today’s Market

1. Be Conventional

There’s nothing better than catching the wave when prices are rising, but value rules when times are tough. Over the past five years the benchmark index for a house with acreage in Abbotsford has risen 280 percent to $1.34 million, while across the river in Mission the increase has been 65 percent, to $524,000. That’s probably because Abbotsford is seen as a burgeoning proto-city and Mission is not, but at what point does speculative potential overshoot genuine utility? (And in a downturn does a nice place to live fare better than somewhere a developer might eventually want to try prying out of the Agricultural Land Reserve?) There are lots of disconnects around Greater Vancouver. Jim Patton finds it amusing that he and Stone could now pay cash for a house in West Vancouver, a neighbourhood they never imagined being able to afford. That’s because the Elgin Chantrell area of South Surrey emerged over the past five years as a kind of suburban Kerrisdale, with prices to match. But can the area’s current index price of $1.11 million be sustained when a house in the real Kerrisdale isn’t much more?

2. Be Condo-Wary

This category of real estate attracts a large proportion of the wrath dispensed by the bad-news bears, who regard it as the domain of flippers and “specuvestors,” a group they disdain or, at least, envy and resent. On the upside, it’s led to blogs like, which wittily dissects the marketing efforts behind our city of glass (admittedly an easy target). On the downside, it’s contributed to global warming due to the number of bears driving around counting darkened windows—a sign, they believe, that an apartment is empty, which means it is owned by a speculator who will be forced to abandon it to foreclosure when the market turns, a crucial stage in the process leading to real-estate armageddon.

All this said, many sane and sober prognosticators regard downtown condos, and apartments in general, as vulnerable, and recent market statistics provide some evidence to support the view. One of the culprits is a flood of assignments—units that were presold and are now nearing completion, at which time the original buyers (those specuvestors) will have to pay in full, something they had no intention of doing. Due to taxes and fees, assigners will have to sell for as much as 10 percent more than the original presale price just to break even, which in a slowing market will be difficult. Assuming Vancouver’s population continues to grow toward a seemingly inevitable three or four million, the long-term future of apartment living is bright—but in the short term there could be blood.

3. Be Aggressive

One of the nicest things about a softer market is the more relaxed pace that’s possible when houses aren’t being snapped up the second they come onto the market. Sometimes that pace is just too relaxed for sellers, who may have an urgent need to unload. Don’t be afraid to make low-ball offers—lots of them, if need be. Eventually you’ll happen upon a vendor who’s desperate to dicker.

4. Be Choosy

Take your cue from the U.S., where the biggest price drops have occurred in depressed areas of the rust belt and low-cost suburbs of cities that experienced dramatic price run-ups. That’s partly due to the sub-prime disaster, which is unique (or nearly so) to the U.S. But it’s still wise to remember a joke that made the rounds in Calgary during the 1980s collapse caused by high interest rates and a plunge in the price of oil. Question: Which of these is not like the others: syphilis, herpes, and a house in Northeast Calgary (the least desirable quadrant of the city)? Answer: Syphilis—you can get rid of that. The theory is that lower-income people are the first to suffer; meanwhile, those still in the market take advantage of dropping prices to move up to more desirable housing and neighbourhoods. If this were to hold true during a Vancouver downturn, condos in spots like Coquitlam and Surrey might be among the hardest hit. Indeed, prices in some areas of the Fraser Valley have shown signs of softening in recent months.

5. Be Flexible

Just as Vancouver has been property mad for the past several years, ‘real estate’ will become a dirty word if there is a major correction. In theory it makes sense to buy when others are selling, and vice versa. Just keep in mind there are no guarantees a slump will end on schedule or that a boom, even one that’s outlasted all the predictions, won’t stretch on for several more years. Well aware of that, even Stone and Patton are snooping around, ready to jump back into the market if the right house comes along. Being too committed to bearishness is dangerous in Vancouver, says Stone. Back in 1996 they thought prices couldn’t get any higher, and traded down to Langley from a house in North Vancouver. A heritage charmer on Grand Boulevard, it was unloaded for the vast sum of $360,000. Current value? Closing in on $1 million. As always: Caveat emptor. But seller beware also.


Buy American

Lurk for a while on Vancouver real-estate blogs and it becomes clear that, just as some people were born to be goldbugs and others live for the illicit thrill of penny stocks, a big chunk of the population can’t imagine investing in anything except property. A couple of years ago, wary of the city’s high valuations, these people started discussing places like Saskatoon (where prices have since almost doubled), later moving on to markets such as Winnipeg, Kamloops, and Prince George. These days, a significant thread on Real Estate Talks deals with the situation south of the border, even as local real-estate guru Ozzie Jurock offers seminars on the subject and ads show up here for projects in Arizona and California. But are Phoenix and Sacramento the new frontiers, or is this a case of all chat and little action?

Though interest in the U.S. is strong, says Jurock, it’s more the latter. The problem is that familiar areas in nearby Washington and Oregon haven’t experienced much of a downturn, and it’s hard to buy and manage a property located in a faraway spot that you don’t understand. In a place like Phoenix, “Only buy A or B properties,” he cautions. “Don’t even look at foreclosures because they’re in terrible neighbourhoods.”

Beyond that, there are difficulties for aliens. (And let’s face it, that’s what we are, even if we remember to call the roof the rouf.) Without visas, we can’t mow the lawn or even collect the rent, a legality that renters quickly discern and that necessitates additional management expense. Still, says Jurock, “I have ‘real estate’ stamped on my forehead.”

His belief: If you can find a place that works for you, whether there or here, buy it, especially if prices happen to be distressed.

The Bloggers

Passionate about real estate? You just might want to join in

Real Estate Talks
A couple of years ago, Vancouver Housing Blog created a stir when it won a national award—only to shut down a few weeks later when its creator found its upkeep too time-consuming. The anonymous “VHB” still chimes in from time to time on Real Estate Talks, whose hundreds of threads are frequented by well-informed investors—among others.

Agent Will
Realtor Will Wertheim writes with considerable insight on a variety of real-estate topics and provides a useful basket of market statistics.

Vancouver (Un)real Estate
This generally reasonable, if rather bitter, bear has
an artistic bent, which he uses to produce graphic concepts revolving around real estate (which is better than having no muse, after all).

The Best Real Estate Anywhere
When VHB shut down, many of its devotees migrated here, attaching comments that run into the hundreds of words to agent Rob Chipman’s daily sales and listings statistics.

Caustic commentary on real-estate marketing materials from someone for whom making a living probably involves, uh, writing real-estate marketing materials.

Vancouver Condo Info
An often interesting assemblage of relevant and less-so information (see the pie chart below), complete with a forum contributed to by many of the usual suspects from Real Estate Talks, Best Real Estate Anywhere, etc. Bet those multitaskers could manage four, five bingo cards.



No one can say what prices will do in future, so your forecast is as good as anyone’s. Don’t have a forecast? Sure you do. To reveal it, simply choose one or the other of each pair of Bull/Bear statement below


  • That’s the U.S. This is here. Our economy is in better shape, and our banks didn’t lend money to high-risk borrowers.

  • There will always be some affordable places. With our amenities and restricted land base, we’re more San Francisco than Saskatoon.

  • Employment is at an all-time high, and increased trade with Asia will help compensate for the U.S. Plus, Vancouver’s economy is quite distinct from B.C.’s.

  • The loonie’s rise against the greenback began in 2002, which is also when real estate took off. Against other currencies there has been little change.

  • Analysts relying on hard data say that speculation is no more widespread than usual; most people buy homes to live in or rent out.

  • Everywhere has problems. Vancouver’s are minor and vastly outweighed by its strengths. Livability is still excellent compared to almost anywhere else.

  • There’s lots more buyers where they came from.



  • Our real estate market will inevitably follow that of the U.S., where a major downturn is well under way.

  • Affordability is at an all-time low and lags behind every city in Canada—and most around the world.

  • B.C. and its trade-dependent resource industries will soon follow the U.S. into recession, with obvious implications for real estate.

  • The rapid appreciation of the Canadian dollar will chase away American (and perhaps other international) investors.

  • Flippers and speculators, not investors and owner occupiers, are behind the price run-up, and they’ll flee the market like the rats they are.

  • Once a veritable dream city, Vancouver has been tarnished by traffic, crime, drugs, and the growing chasm between rich and poor.

  • The only people who could still afford to buy have all been whacked.


If You Chose. . .

4 or more “Bull” statements, load up on those presales. With the Olympics almost here, the boom to come will make the first part of the decade look like a warm-up act.

4 or more “Bear” statements you expect grim times ahead. Prices could easily drop 10 percent or more—rewarding (at last) those who showed prudence by selling in favour of GICs five years ago.