How Covid-19 caused Vancouver’s condo conundrum

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How Covid-19 caused Vancouver’s condo conundrum As homebuyers reject high-density city life in favour of suburbia, apartment prices drop © Getty Images/iStockphoto Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Save Antonia Cundy 16 HOURS AGO 10 Print this page Be the first to know about every new Coronavirus story Get instant email alerts Jill Cory and her husband had been talking about moving out of their apartment in Vancouver for years. But it was not until Jill’s 96-year-old mother — and her dog — came to live with them during the pandemic that they finally decided to make the leap. “The condo was just starting to feel a little tight with three dogs instead of two and three people instead of two,” says Cory. “We’d been looking around already . . . So when mum came to live with us she was a bit like: ‘Well, what are we waiting for?’” For the price of their 1,300 sq ft condominium, which they sold for C$1.68m (£960,000), the Corys bought a 3,800 sq ft house on an acre of land not far from Victoria on Vancouver Island, off the city’s Pacific coast. The purchase was a whirlwind. The Corys’ condo sold for less than they had hoped, but the previously slow market on the island suddenly grew frantic. “We were up against so many buyers,” says Cory. “We were outbid on a couple of offers, and several properties were sold before we could even view or offer on them,” she says. For the home they did buy, the Corys offered C$62,000 over the asking price, with a clause saying they would add another C$10,000 to the highest bid the seller received. Residents have been leaving the high-density city areas for places such as Vancouver Island © Getty Images/iStockphoto The couple’s experience illustrates the dual market that has emerged in the Canadian city — regularly ranked among the most liveable in the world — since the outbreak of coronavirus. With travel restrictions blocking international buyers and locals looking for more space to work from home, the value of central, high-rise apartments has dropped sharply while prices for detached, single-family homes have risen by hundreds of thousands of dollars. “It’s not normally like that, the condo and detached markets normally move in lockstep, but that demand to live in a detached house with a yard has meant they’ve taken completely divergent paths this year,” says Dane Eitel, founder of real-estate analytics company Eitel Insights. In November, the average price of a condo in Vancouver’s inner city was C$765,875, an 8 per cent drop from January’s C$831,864, according to Eitel Insights. Meanwhile, in Greater Vancouver, which includes the inner city and extends over 2,877 sq km to suburbs on and around the Fraser River delta, the average price for a detached home rose 10 per cent over the same period, from C$1.59m in January 2020 to C$1.75m in November. “We’re seeing people looking for outside space, getting away from density,” says Kevin Skipworth, owner of Dexter Realty in Vancouver. “It’s primarily driven by locals; we haven’t seen much investor activity,” he says. “We’ve seen the majority of demand for what we call town houses here. The concrete high-rise sector, which requires a lot of investor financing and presales, hasn’t been as strong.” South-west of Vancouver’s downtown peninsula, detached houses start to crop up in beachside Kitsilano, or Kits. Crammed with yoga studios and juice bars, the neighbourhood attracts a slightly younger crowd than Vancouver’s other prime residential areas — it is where Lululemon, the activewear brand that sells $100 gym leggings, opened its first store. Kitsilano Beach has a relaxed, boho feel © Canadian Press/Shutterstock Further south-west are the city’s grander residential areas, where vast houses sit within large green plots. At the top of this market is Shaughnessy, the only Vancouver neighbourhood built on winding tree-lined boulevards rather than a grid system. The inverse trajectories of condos and detached homes come after a controversial few years in Vancouver’s residential market. Between 2015 and 2018, a flurry of international interest, particularly from mainland China, helped send prices rising by 88 per cent in the condo market and 40 per cent for detached homes, according to Eitel Insights. In the US, people are sick of talking politics. In Vancouver, people are sick of talking house prices Recognising what British Columbia’s former finance minister Carole James called a “real estate crisis”, the provincial government tried to bring prices back under control with taxes such as a speculation and vacancy tax levied against empty homes. In 2019, prices dropped by around 15 per cent. “In the US, people are sick of talking politics,” says Cory. “In Vancouver, people are so sick of talking about house prices.” For the Corys, who moved away from Vancouver for six years in 2012, the reality of trying to move back into a city where prices had risen so dramatically was stark. The couple had to sell their home in Dunbar, on Vancouver’s western side, in order to be close to their son, who was receiving medical treatment in Calgary. After their son passed away, the Corys could not afford to move back to their Dunbar home, which they had sold for C$1.75m in 2012. “The international investment community had driven prices up so much that six years later it was worth C$2.8m,” she says. Between 2015 and 2018, international buyers helped condo prices rise by more than 60 per cent but the pandemic has reversed the trend © Getty Images/iStockphoto It was not only the prices that were unrecognisable, the neighbourhood itself had changed. “Our beloved Vancouver, which we had lived in and loved for 35 years, just wasn’t the same. There were empty homes, small businesses had closed and condos went up instead,” says Cory. “When we first moved in it was a very lovely, heterogenous and connected community with beautiful, established old homes. There were professors, teachers, doctors — people who had lived there for 20 or 30 years.” Recommended ExplainerCoronavirus economic impact Pandemic crisis: Global economic impact tracker Government policies and, more recently, the pandemic have slowed demand from international buyers. But wealthy locals looking for more space during lockdown have sent Vancouver’s detached-home market creeping back up towards its 2017 highs. In Shaughnessy, the average price of a home between April and December in 2019 was C$4.1m, according to Dexter Realty. Last year, in the same period, the average price was C$6.1m. For locals without big bucks, this means that getting more space entails looking far beyond the traditional residential areas on Vancouver’s west side. Roman, a 28-year-old who moved to downtown Vancouver from Barcelona three years ago, began to dream bigger this year when he realised working from home was not going to be a temporary fix. Last month, he bought a three-bedroom town house with a garage in Coquitlam, a suburban area on the outskirts of Greater Vancouver. Surrey, near the Fraser River, is part of Greater Vancouver © Getty Images “I don’t really need to stay in downtown Vancouver, work is pretty much the only reason I’m here,” says Roman, who only wanted to give his first name. “The reason I moved further away is because if I were to find a place similar to that, or even a two-bed, in Vancouver, it’s next to impossible [for that price].” Roman paid C$730,000 for the new-build house, which will be finished this year — the monthly mortgage cost of C$3,000 is C$1,000 more than the rent on his one-bedroom city apartment. He adds that part of what drove his decision was the inequality in the area, particularly the Downtown Eastside, which is at the epicentre of British Columbia’s opioid crisis. “It’s a really nice city if you ignore this major problem . . . It’s really close to nature, there’s lots of great food, there’s so many things to do, but it just gets so depressing going every day to work,” he says. “You live in a million-dollar condo and then you go downstairs on to the street and you’re in a completely different world. I would see needles on the ground and people screaming every day,” he says. “The pandemic made me think: do I have to stay in this place that I don’t really like, or could I move somewhere better to improve the quality of my life?” ‘Because of Covid there’s no need to work downtown. The exodus from the condo market has been real,’ says Eitel Insights © Getty Images Moves like this are causing trouble for the investors who own buildings or apartments like Roman’s — especially those that bought close to market highs. “We have a large rental base here and now because of Covid there’s no need to work downtown. The exodus from the condo market has been real,” says Eitel Insights. “So now owner-investors have no rent covering their mortgage, so they’re either looking to get out or they’re looking to stem losses.” This slide in prices is likely to increase further, Eitel says, as new-builds come to market in the next year. “I actually see the condo market inventory increasing because we’re seeing the completion of these buildings that people bought as investments years ago. House & Home Unlocked FT subscribers can sign up for our weekly email newsletter containing guides to the global property market, distinctive architecture, interior design and gardens. Sign up here with one click “What that ultimately leads to and has already led to downtown is a cannibalisation factor,” he says. “You see those older buildings have to reduce their prices quite aggressively to get a sale and then the newer ones have to reduce their prices too.” Stéfane Marion, chief economist at the National Bank of Canada, adds that Vancouver’s residential market is dependent on immigration and that if travel restrictions do not loosen in the next year, the market is likely to see a “significant softening” across the board. Without immigration, there would be no growth in Canada’s millennial population. But on Vancouver Island, where the Corys moved last month, they are focused on trying to regain a sense of their old life. “Some people say Victoria and the area around it is like Vancouver was 30 years ago,” says Cory. “We’ve only been here a few weeks and we absolutely love it so far.” Buying guide In 2016, the British Columbia government introduced a foreign buyers’ tax — now 20 per cent — on the market value of properties in certain areas including Greater Vancouver and Greater Victoria. If a residential property is worth more than C$3m, there is an extra 2 per cent tax on the value above that amount. Properties for sale Apartment, East Vancouver, C$1.459m A three-bedroom, two-bathroom condo next to Queen Elizabeth Park, which is close to Vancouver’s Main Street. The apartment, which measures 1,215 sq ft, has a 160 sq ft balcony and a small office space. Available through estate agents Dexter Realty. House, West Point Grey, C$6.998m A three-bedroom, four-bathroom property in the prestigious “North of 4th” neighbourhood. The house, which measures 4,353 sq ft, has a garden and a roof terrace that has been reinforced for a hot tub. Available through Christie’s International Real Estate. Contemporary home, University Endowment Lands, C$31m © David O. Marlow Near the University of British Columbia on the Point Grey peninsula, this grand contemporary building measures 10,139 sq ft. The property has four bedrooms, five bathrooms and ocean views. Available through Christie’s International Real Estate. Follow @FTProperty on Twitter or @ft_houseandhome on Instagram to find out about our latest stories first. Listen to our podcast, Culture Call, where FT editors and special guests discuss life and art in the time of coronavirus. 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