Making Predictions about Vancouver Real Estate - Vancouver Real Estate Podcast - 2 years later

In 2020 I was invited by Adam and Matt Scalena, two charming and successful real estate agents to be a guest on their podcast. While I can't remember what I said then, I was invited back two years later in November 2022 on the day Ken Sim and his new council was inaugurated.

Over the weekend, someone mentioned that they had recently listened to this podcast (it was raining too much to play golf) and was suprised by how many of my predictions turned out to be right, and so terribly wrong!

Being the self-centred person that I am, I just listened to a portion of this interview. While I was embarrassed by some of the things I said, sadly I was right about how the deteriorating condition of the Downtown Eastside would ultimately lead to street crime impacting citizens throughout the city. City planners were in part to blame.

Below is a summary of some of the topics we discussed. If you have time, and are trying to decide whether to rent or buy, and where to buy, you might be interested some of the things  we discussed.

Does the current economic moment remind you of any other time in history?

Today is a mild version of what I witnessed from 1981-1983. In 1981, developers in Vancouver were making a lot of money and drinking very expensive wine. By 1983, interest rates had risen to 18% and that slowed everything down. Some house prices were dropping by 40-50%.

That is not what we’re seeing now, but we are seeing a decrease in sales. The rise in interest rates is impacting sales and prices, and it’s also causing pauses in both strata and rental developments. A lot of projects that looked attractive two years ago are not feasible today.

I don’t want to pretend I know what will happen to interest rates. When I grew up, 7-8% was considered an attractive rate.

What we do know is that a lot more people are moving to Canada, so the demand is there. It’s a question of figuring out how to match supply and demand.

How will the current interest rate environment impact housing affordability?

Vancouver will never be as affordable as Winnipeg. The cost of land, cost of construction and current interest rates make it hard to produce housing for those with modest incomes in this city.

It seems like the cost of building is up while house prices are coming down. How does that play out in the short term?

If all of the developers start putting their projects on hold, construction costs will come down. The contractors will be a bit hungrier. But there’s still the cost of materials.

One problem is a lot of these costs are global. It’s hard to believe the war in Ukraine impacts the cost of construction in Vancouver but it’s true. That’s a reality we have to deal with.

Will we see housing prices drop significantly in Vancouver?

No, I don’t think we’ll see prices drop by 50% in Vancouver like we saw in the 80’s. We’ve had downturns since then, like in 2008 when many developers went broke. We’ve seen costs go up and go down.

I got some advice when I was younger: Buy as soon as you can. Even if you pay too much, it won’t matter in the long run. That advice has stuck with me and I’ve given it to a lot of younger people. Prices do go up and down but in the long run, it doesn’t matter. In the long run, prices go up.

Don’t think of your personal residence just in terms of an investment

Is Ken Sim’s plan to improve the permit approval process feasible?

On election night, I was invited to an event to discuss what was happening. Colleen Hardwick was asked whether Ken Sim would be able to improve the approval process and she said he couldn’t. To which I replied, “The approval process in Vancouver is so bad it’s impossible not to improve it!”

I don’t know if Ken Sim will be able to get the process down to three days, three weeks or three months, but there are lots of ways to improve the permit approval process in Vancouver.

I drove down Cambie Street on my way here today and noticed all of the little bungalows that have been replaced by six-storey buildings. To achieve that, the city did an overall plan for the street and every single building went through a lengthy and expensive rezoning process.

That’s nuts! Some of those buildings are not particularly beautiful and they still went through this long process. We don’t need to have so many rezoning meetings and a complex review process. We need to rethink the role of the urban design panel. So yes, we can definitely improve the approval process in Vancouver

What is it about Vancouver’s permit approval process that is so challenging?

There’s such a backlog of applications at Vancouver City Hall because the staff have to go through such a lengthy process. I sent a note off to the city planners this morning and if it was any other developer, I’d expect a response by the end of the day. But with the city planners, I don’t think I’ll ever get a response!

There’s a lot of great staff at City Hall and I think the new council will bring in some good changes.

There was once an idea that we’d have the equivalent of a Nexus lane for architects, planners and developers who have demonstrated that they’re honest and do a good job. Why should they go through the same lengthy process as inexperienced people who need more hand holding? I think that’s an excellent idea for municipalities to adopt.

Do you think electing Ken Sim was a win for Vancouver?

Yes, I do think Ken Sim becoming mayor is a win for Vancouver. I know Kennedy Stewart and he’s a decent guy. But he’s just not the inspirational leader so many of us were looking for.

And for some reason, so many things got worse and not better under his leadership. The situation in the Downtown Eastside was one of those areas; the city should never have allowed the situation to deteriorate to the point that it has.

Back in university, I did my thesis on setting up modular housing on vacant lands. When I ran for city council in 2008, I suggested setting up these same modular units to help address homelessness. Finally, many years later, that idea was adopted. The way they are using them is expensive but there are other ways for us to create housing solutions.

Modular units or RVs may not be the right answer to address homelessness but we do need to come up with more creative answers. Sometimes it takes longer to build social housing than market condos

What is the biggest challenge facing Vancouver right now?

I think the situation in the Downtown Eastside is a huge problem for Vancouver. It does lead to a lot of crime and there’s nothing worse than worrying about your personal safety. I know a lot of people who are moving out of single family homes and into condos for the added security.

Right now there are five tents in front of St. Paul’s Hospital. Do we wait until there are 25 tents until we address the situation? We’ve become almost immune to this. People walk by these tents all the time without raising an eyebrow. We have to come up with some solutions

On housing affordability for young families in Vancouver:

Another problem in Vancouver is that so many people cannot afford to live here. And they certainly can’t afford to live in Vancouver and have children.

It bothers me that people are deciding whether or not to have children based on whether they can afford suitable accommodation. To those people, I saw you should move to Trail or Nanaimo, start a new life, and have children.

The Globe & Mail recently published an article saying young people should leave big cities like Toronto and Vancouver for the sake of their financial futures. Do you agree?

I hate to say it but in a way I subscribe to that. I worked in St. John’s, New Brunswick a number of years ago and at the time, St. John’s was ranked as one of the least liveable cities in Canada. But there was a good quality of life there. The cost of living and housing was considerably less than living in Toronto or Ottawa.

So while I want to give young people ideas about how to get into a house in Vancouver, at some point people should consider whether they can afford to live in Vancouver. Those ads we’ve heard about people moving to Alberta can be pretty enticing.

Are municipalities outside of Vancouver facing the same problems?

The problems we see in Vancouver’s Downtown Eastside are not restricted to the Downtown Eastside. We’re seeing the same issues in Surrey, Maple Ridge and in other municipalities. Compared to the climate in the rest of Canada, Metro Vancouver is a lot more comfortable.

I was in a discussion recently about the growing tech industry in Vancouver. One of the concerns was rising housing costs for all of the employees of these big tech firms. I shared with the group that in San Francisco, they have Google buses that pick up employeesfrom the suburbs and bring them to work. There’s a similar program here with a bus going to/from Port Moody.

What areas outside of Vancouver do you see people moving to?

Port Moody is a sophisticated place. For people who can’t afford Yaletown, they move to Port Moody. There are a number of attractive communities, like Port Moody, North Vancouver and New Westminster, within Metro Vancouver. And you can go further; Abbotsford and Chilliwack can offer you a pretty nice quality of life.

When I did my first project in 1989, my wife and I took $1 million up to Squamish to buy property because I was convinced Squamish was the future. And now, Squamish is so expensive that people are moving to Pemberton!

If I was a lot younger, I’d invest in real estate in Lillooet. It’s far away but it’s a community that is going to transition over time. I visited a few years ago and it inspired me to write an article about how Lillooet is changing.

From these municipalities, you can still come into Vancouver. But a lot of people who do move out find they don’t want to come back into the city as often. On the weekends, I like to go out on my bike and discover different municipalities. It’s amazing how much is available outside of Vancouver.

We sometimes get it into our minds that the world revolves around Commercial Drive and Main Street… And those are prime places! But there are other communities outside of Vancouver that offer similar amenities.

Are you seeing a shift away from urban centres? Are cities less important?

There’s a wonderful blog by Brandon Donnelly, who is a big supporter of urban life. I mention this because there is a percentage of people who believe living, working and playing in the city is the way to go.

But there is also an increasing number of people who want an urbane existence but don’t need to have it in downtown Vancouver.

A number of years ago, a friend of mine became the mayor ofTrail, BC and so I was invited to visit. After spending a weekend there, I realized that Trail is a fabulous community. It has a history of mining but things are starting to change. I met a lot of interesting people who had moved to Trail to start new lives. They cared about the look of the community and it did look very attractive

Are smaller communities in BC having a moment?

I think so. One of my daughters moved to New West and the other moved to Victoria.Victoriahas been growing a lot over the years and downtown Victoria is very urbane. It’s like Vancouver was a few years ago. They have their own issues with crime and homelessness but it is still an alternative to Vancouver. Other alternatives would be Kelowna or Penticton.

The world is changing. It used to be East Vancouver was where you went for craft beer, but now Courtenay is winning that battle. When I was in Victoria, I picked up some whiskey and gin from local distilleries

On tackling housing affordability by mixing light industrial and residential housing:

When people ask me where we should build more affordable housing, I always say we should integrate housing with light industrial usage. And what prompted that idea was my daughters taking me on a craft brewery crawl for my birthday a few years ago. As I sat in these places with my pint of beer, I kept wondering why there wasn’t housing above.

So I’m now pitching a new project where we don’t reduce the number of industrial units but we incorporate residential units within it. In my mind, that makes a lot of sense. It helps us increase capacity and make the most of the high cost of industrial land. False Creek Flats would be an ideal spot for this.

For years, people opposed the integration of housing with light industry because they thought it would raise the value of the land so much that industry wouldn’t want to be there. But that’s simply not true.

Anytime I see a one or two storey building in Richmond, I just want to put a modular house on the top! When you look at a parkade, almost no one parks on the top floor. So why not put housing there?

One of the reasons why I think the Downtown Eastside got worse was because in 2014, city council decided to restrict condo development in the Oppenheimer District of the DTES. I argued against that because I believe we need a broader mix of people in the area, rather than a “ghetto” of low income people.

But the council decided to not allow condominiums so as to not increase the value of land and make it unaffordable for social housing. That was a mistake. We need to advocate for a broader socioeconomic mix in that area

What are your thoughts on the supportive housing project at 8th and Arbutusthat a lot of people seem to be against?

I did participate in that discussion and I did support having social housing in that area. But what I did not support was having a high concentration of formerly homeless people all brought into one building.

When I was at CMHC, we used to talk about what the magical size of a building should be. We concluded that when you went above 60 units, you change the complexion of a building. So my argument against this site wasn’t with the scale of the development but was with wanting to put 100 formerly homeless people into the building.

Why can’t we make social projects just look like market or rental projects? I found this building looked too institutional. If it just looked like a regular apartment building, I think it would have generated less opposition.

Will areas in Vancouver like Chinatown and Railtown have their day again?

Absolutely. The pendulum swings and neighbourhoods change over time. Some neighbourhoods have always been beautiful but even places like Shaughnessy went through hard times. Over the years, things change and now we’re allowing subdivisions and coach houses in Shaughnessy, which is great.

Point Grey used to be a beautiful neighbourhood. Now, a lot of the shops are boarded up and the Safeway left. It’s not attractive. But in 20 years, it will be. New retail will come in, transit will get closer and the area will have a revival.

Throughout history, neighbourhoods get better and worse. Some do better than others but the pendulum does swing.

What do the next 1-5 years in the Vancouver real estate market look like?

Construction costs have now risen to the point where projects are going on hold. But as more projects go on hold, the construction costs will come down and the projects will get going again.

A lot will depend on what happens to interest rates, as well as what is happening in the global context. What happens in the US and China and in other parts of the world impact us and we don’t have control over that.

But municipal governments do have control over certain things and the stuff they can do is important. They have to deal with crime and housing affordability, but they also have to work on building liveable and attractive communities. I don’t understand the priorities of people in government who let these places deteriorate

I hope most municipal governments will commit themselves to making our communities more and more liveable. If not, I’ll have to come back on this podcast in a few years and encourage people to move to Lillooet and Trail and other places that are focused on creating liveable communities

The 5 Wire: Getting to Know Planner & SFU Professor, Michael Geller

What is one book you’d recommend listeners read?

I’ll give two books. For your younger listeners, I recommend “21 Lessons for the 21st Century” by Yuval Noah Harari. I highly recommend that book! Harari is a wonderful writer.

For your older listeners, I recommend “The Last Days of Roger Federer: And Other Endings” by Geoff Dyer. It’s not just about Roger Federer or tennis but about people’s last days. If you’re a musician, when do you decide to stop? Do you stop when you’re at the peak or do you keep touring forever?

For us real estate people, we probably won’t stop until no one will hire us. I love what I do so I can’t see myself stopping anytime soon

In the last 5 years, is there a new belief, behaviour or habit that has improved your life?

I’ve changed my attitude towards what I eat. I’ve become more conscious about what I eat; I actually look at the ingredients on the packages and every once and a while I put something back.

What music do you have on repeat right now?

10cc! In the 1960s and 70s I lived in Manchester with a group that hung out with Graham Gouldman. I’m stuck in the past!

What have you been binge watching?

When I was in Europe I attended an architecture and design film festivalwhich then came to Vancouver in early November. Even if you missed the event, you can look up the films.One film I will recommend is about Richard Henriquez, who is a friend of mine and has designed a lot of important projects in Vancouver.

What is something you’ve purchased in the last few years for under $1500 that has had a positive impact on your life?

My golf clubs! If you had asked me 40 years ago, I’d talk about a painting or sculpture because that gave me the greatest joy back then. But that’s not so important to me anymore.

The next time I’m on, it will probably be my electric bike. I don’t have one yet. People who own them tell me they’re always worried about their bikes being stolen, so hopefully we can do something about that.

https://www.vancouverrealestatepodcast.com/podcast/50-years-of-vancouver-real-estate-wisdom-with-michael-geller/