Shhhh…the don’t ask, don’t tell of Vancouver Real Estate affordability.
Unaffordable housing is Vancouver’s secret brand, dressed up for lattes in cuddly green amenities. It’s killing our economy (outside the ruling real estate industry), driving away young people, breaking up families and making the city less attractive for working people without an inheritance, a previous investment in real estate or a mysterious source of cash income. – Peter Ladner, BC Business
One source of “mysterious income” that people allude to, much like Ladner does above is – let’s be frank – drugs. We’ve discussed one elephant in the room on this site – i.e. foreign investment – but I think there may be two of these massive mammals at the real estate party that we should consider.
It doesn’t take a Sherlock Holmes to see how much illegal activity is taking place in our city. Money laundering, drug importing and selling, gang activity etc. Does this have an effect on housing affordability in our city…absolutely. Regular, middle-income folks scratch their heads and wonder who these people are that can afford $1.5-2 million dollar houses, never mind the $3 million plus that are getting scooped up in a neighbourhood near you. Where is the money coming from? You tell me.
What are your thoughts? What are the “mysterious sources of income” that are allowing certain people to afford the insane housing prices in Vancouver?
I definitely agree on the foreign investments and drug money as fuels for our outrageous prices. If people aren’t doing this you can be damn sure there is more than one generation living in that household and splitting a 5-8 thousand dollar/month mortgage
Drug money driving real estate prices? Really??? Now I’ve heard everything.
Ok so lets do a quick survey…how many of your neighbours on your block’s source of income is drug dealing? If that is what’s really driving the market, as opposed to all other economic engines that make up our economy, then you would have to think a pretty high proportion. There would have to be at least one or two drug kingpins on every block you would think. I wonder who the one on ours is… Must be the house with the fancy cars. They aren’t really physicians…I bet that’s just a cover. They’re really meth dealers with a grow-op side business in the garage. Yeah, it MUST be drugs.
Richard, Richard. I’m not insinuating that there are meth labs or grow-ops on every block. The people who do that are at the bottom of the drug industry ladder here…not at the top. I’m talking about dirty money in the city…and how it affects everything – including affordability. My question was not if it is the complete cause of it, but is it a contributing factor, like many others including the economic engines you mention in your comment?
And, btw, the last physician I met was renting a basement suite because he couldn’t afford to buy a house.
My thoughts exactly. There needs to be more done about this illegal activity.
As a Realtor, whenever someone buys a house, they must fill in a FINTRAC form, as proof that the money is not from crime. So, either the drug money/dubious foreign money are completely untrue…or…the government simply doesn’t even look at the FINTRAC forms. I was an immigrant with little money, and I can assure you that it took a long time to get into Canada. I wonder if it’s the same for rich people.
To me it’s like the urban myth of the empty condos…it’s a catchy story that feeds peoples’ prejudices but doesn’t stand up to scrutiny.
I don’t know any drug dealers in my part of town but I do know a lot of people with very high incomes in legitimate professions or businesses who are buying or building beautiful new homes for themselves. They are the drivers of real estate demand, not drug money. And no I am not a realtor, this is just my observations in my neighbourhood, at my kids’ school, etc.
Fair points…maybe it is an urban myth, after all…it would be near impossible to legitimately (how ironic) to prove.
And…you may not know the drug dealers, but they are everywhere…no matter how nice your part of town is, Richard. I grew up in a squeaky clean, west side neighbourhood and the dealers would deliver to people’s doors.
Richard is my favourite commenter on this site. The Kits guy who bikes to work, thinks Vancouver is affordable, the salaries are good, and that there aren’t drug dealers in his neighbourhood. He is everything I hate about this city. Do you know what a drug dealer looks like? Because some of them look like normal people with kids and a normal car and a dog (I knew some way back when.) And of course they are everywhere, drugs are a 6-7 billion dollar industry in BC. BC!!!!! That is a lot of money, and requires a LOT of drug dealers and grow ops.
Indubitably, ThirtiesGrind. “My word is my bond.”
And if that won’t suffice… Here’s some BackStory…
http://www.imf.org/external/pubs/ft/issues/issues30/index.htm
[Hint: PoliticalWill in BC/Canada is a bit 'thin' in this regard... Now ask yourself... Why is that?]
This is the most ridiculous argument regarding housing prices I have ever read. So by this logic Vancouver is supplying the entire world with drugs and no other city in the world has drug dealers. Bye the way Alexandra BC’s GDP is over 200 billion so your 5-6 billion number is about 3 percent of that and then add foreign invesyment and you probably approach 1% for drug dealers buying property. Hardly a figure worth crying about. I also think its time you did a little research about the city you once knew because Richard is right, there are many succesful locals buying and building in the city. Finally, think the author should not insult the medical community by suggesting that thry can only afford a basement suite. The average salary for physicians in BC is well over $200k! If you add to that a second income you would realize a $2 million dollar home is not that much of a stretch.
Maybe it is a ridiculous theory…but one I’ve heard thrown around quite a bit so thought I would be worth discussing, so I welcome the insight.
To clarify, the comment about the physicians was
sarcastic…
I didn’t say that there were no drug dealers in my neighbourhood, just that I don’t know any. But I do know just about every family in my block, and whenever a home has sold and a new family has moved in, we have made an effort to get to know them. I don’t disagree that drugs are everywhere. Where I disagree is that I don’t believe that drug money has an undue influence on price of real estate (or anything else) that is any different from any other typical major city. I was merely pointing out that, if drugs are a major factor in driving up real estate prices (especially in the $2-3M range mentioned) as the post suggests, then it should be pretty conspicuous. And it’s not.
I think the evidence for foreign buying is very clear. Not so sure about the “drug” money but there will undoubtedly be some of it. A lot of the buying will also be “ordinary” people and businesses speculating to make money in a rising market. The market has already started to fall at which point many speculators will bail out as the market spirals downwards. In the UK this has already happened and average house prices are now down to 2004 levels. Vancouver/Canada may be in a better position economically but a house price level of 11x average earnings is unstainable and the ultimate decline is almost impossible to stop. Good luck..
@JJ said exactly what I was thinking. There is no doubt drug money is out there buying up houses, but I think there is another larger contributing factor. Take a look at where your tv and iPhone is made, or the benefactors of high oil prices, or where the call center is when you call for tech support, etc. With these factors as catalysts, RE agents, developers, existing home owners wanting to move up, speculators, etc. start making sh-loads of $$$ and guess what? Bubble. Just my thought and theory.
@10B 1% is a lot, given that this is an illegal business. I’m not saying that its effect matches that of foreign investment, but it is not something worth scoffing at. And sure, there are wealthy professionals buying property, but there are A LOT of middle income people who aren’t. This blog, and the many articles on the subject, plus the government initiatives are proof that there is a major problem in Vancouver.
@Richard Do you think your new neighbours will tell you they are in illegal business? “I’m a teacher and my husband imports cocaine.” I dont’t think so. Drug dealers want the same thing as normal people, nice neighbours who will keep an eye out when their dogs escape and who will lend them a cup of sugar, so of course they are going to be nice and tell their neighbours what you want to hear. And the fact that you bothered to mention that you “make an effort” to get to know a new neighbour when they move onto the street is an excellent indication of just how badly your head is shoved up the ass of the Westside. News flash, ALL decent neighbourhoods/neighbours do that, and only someone on the Westside would bother shouting out about it, because most streets in that area don’t do that, and THAT is weird. In all of the houses my family has lived in (all Westside) they have never really known their neighbours. Just the other day I was getting out of the car in front of my parents house, pregnant, with my one year old son, and an older woman walked by me and I was shocked that she didn’t smile (something I’ve gotten used to in most good residential neighbourhoods.) Then I remembered… it is the Westside. People don’t do that.
And lastly, ask a honest real estate agent (ok, that will be hard to find) how many people try and buy houses with cash. It happens frequently. So yes, drug dealers do have an impact on the housing market, small, but worth mentioning.
Thanks Melissa for this lovely debate!
What I find most amusing about this debate is that we have yet to mention the source of the quote. Peter Ladner is exactly the citizen he is describing, someone who has amassed wealth from inheritance and property value escalation. The canary of this argument is definately inheritance, Bob Rennie touched upon it earlier this year that seniors in Vancouver are sitting on over $80 billion of property equity that they will be leaving to their kids. Combine that with the fact that the city is probably the most desireable destination for the nouveau rich in asia and that our population is growing faster than most every other city in the developed world, therefore you have the current environment. So if you think property prices on the westside are going anywhere but up over the long term you are sadly mistaken.
Points to consider.
How does one clean money in Vancouver?
#1 Buy with funds, and renovate using cash. Cash for this cash for that. Sell at a profit. Walla you’ve cleaned your money.
#2 Earn it overseas. Transfer funds to Canada. No checking here. No one seems to care. Does that seem right? In the end who suffers?
“It’s killing our economy (outside the ruling real estate industry), driving away young people, breaking up families and making the city less attractive for working people without an inheritance”
Couldn’t agree more. My chinese land lord and her chinese real estate agent are coming over today…we rent a tiny house recently listed for 2.2 million just because it sits on a larger lot on the west side. We’ll keep looking in other areas of the city for a long term rental – we want a detached house near a good school. a place where we can stay a few years – anyone know of one?! anyhow, i find it funny how this discussion somehow always touches on an east vs. west side debate. makes me sick how disconnected the dwellers of this city are. it is a very cold place indeed. we can’t even agree that the real estate market is ridiculously over priced fulled by corruption and greed, never mind the increase in tacky aesthetics. oh ya, and it’s pouring rain again, did i mention this 2.2 million dollar house has a leak?! hahahahaha! vancouver = crazy.