So whenever I make a video about real estate bubbles the comment eventually comes up, “Vancouver and Toronto are world class cities, so they couldn’t possibly be in a bubble”. The other comment is that Vancouver and Toronto are cheaper than other “world class” cities, and that also means there can’t be a bubble in these cities.
Let’s talk about that.
So first of all, are Vancouver and Toronto world class cities? Sure. They have all the stuff you want out of a city. The same stuff that Cities have all over the world. Restaurants, shopping, things to do and things to see. There are a lot of great things your could say about Vancouver and Toronto, but I want to talk about something that these cities are missing. And it has a big effect on livability.
Weather. For most of the year Vancouver and Toronto have bad weather. When I am thinking about the livability of a place, the first thing that jumps to mind is the weather. Weather has a huge influence in your day to day living, from what you wear, to what you can do outside, to your overall happiness. I am thinking that these lists of most livable cities must only be considering the summer months, because in the summer Vancouver and Toronto are lovely!
Let’s take Vancouver for instance. It rains in Vancouver. 44% of the days. So almost every second day it rains. And about 70% of the days are cloudy. I have met people that couldn’t even make it through 1 whole year in BC because it was so dreary for most of the year. (They were forced to move to the prairies where there is much more sun throughout the year). If I have a bunch of money and am going to choose a place to move to, am I going to choose the place that rains all the time and is perpetually cloudy? Probably not? This really hit home when I was watching one of those shows where people buy houses in paradise with my dad. This couple was looking at houses somewhere closer to the equator, with year round warm weather, white sand beaches and crystal clear water. And the homes they were looking at were $100,000 to $200,000 less than Vancouver! And as I am watching this I am thinking, why are people buying in Vancouver when they could buy there? And speaking of crystal clear water, my wife was talking to our doctor about going to the beach to go swimming here in BC. His reply was something along the lines of “no thank you”. He took out his phone and showed her a picture of the water where he grew up and it looked beautiful and clear. The waters of BC look more like soup. All this makes no sense to me. Vancouver’s weather alone should disqualify it from being among the most livable cities in the world.
Now I don’t know as much about Toronto, but I have heard that it is fairly chilly for large portions of the year.
So with all this considered, why are the Chinese coming in droves?
1) An established community. Chinese have been living in these cities for decades. That’s why they have their own “China Towns” within the cities.
2) People all around the world are generally sheep. They are just following the sheep in front of them. So as Chinese have come to invest in these cities, others have followed, and these cities have become known as safe havens to park a bunch of money in.
3) The Canadian government has left large loopholes for foreign buyers to buy real estate while avoiding foreign buyer taxes. (They are starting to close these now).
4) Young Chinese are moving here for education and their families are buying them houses and really nice cars. How long are they going to stay once their schooling is done?
So what happens when prices start falling and these cities stop being a safe haven to park money? What happens when the Chinese buyers start to realize that for the same money they can buy property where it is warm and sunny most of the year? Is it already happening? Are the foreign investors buying summer homes (condos) in Vancouver because they realize that summer is the only time it is worth being in Canada?
Now a quick note on Vancouver and Toronto being cheaper than other “world class” cities around the world. So we can talk about foreign buyers all day long, but what has the biggest influence on home prices is domestic buyers. People who already live and work in Canada. And guess what? Canadians in these cities make less money on average than other cities. At the end of the day people can only buy what they can afford from their paycheck, so it makes sense that Canadian cities are cheaper than other cities around the world.
Maybe I am wrong about all of this. If so, tell me in the comments.
Are Vancouver and Toronto “World Class”? | Is it enough to stop a Bubble? #buy #RealEstate in #Canada
And you shall remember the Lord your God, for it is He who gives you power to get wealth, that He may establish His covenant which He swore to your fathers, as it is this day. – Deuteronomy 8:18