Homes aren't too expensive - downsizing, equity-rich boomers to drive market, Rennie says
Condo marketing guru Bob Rennie has a simple response to talk that Metro Vancouver's real estate market is headed for a hard landing because of sky-high prices.
"It's not a bubble," Rennie, director of Rennie Marketing Systems, said in an interview following his keynote address Thursday to the Urban Development Institute.
"With 80 per cent of the [condo] market that traded in [Metro] Vancouver last year, you only needed a household income of $52,800 to purchase.
That's not a bubble story."
Rennie, who spoke to a full house, said aging baby boomers with billions of dollars in equity will become a much greater force in the condo market as they increasingly downsize from expensive single-detached homes, and put money aside for their children.
He noted the number of people aged 55-64 will increase 38 per cent between 2009 and 2018, those 65-74 will increase 56 per cent, while those 35-54 will only increase by 4.6 per cent.
Because of that, he said, developers should shift their thinking into providing more larger one-bedroom condos to accommodate the downsizing boomers.
"Baby boomers are sitting on $88 billion in equity in Greater Vancouver and they're looking at their retirement years.
"That equity will be freed over the next 15 years [and] when they sell their home, they'll buy down and help their kids."
Rennie said there were about 19,000 condo sales in Metro Vancouver in 2011. While the average price for 80 per cent of those condos was $315,000, the overall average price was $427,000, which required an income of $66,000 to finance (with a 25-per-cent down payment).
Rennie noted that proximity to transit is paramount for today's homebuyer.
"In the '70s and '80s it was location, location, location. In the '90s through mid-2000s, it was timing, timing, timing. From here forward, it's transit, transit, transit."
He also called for more regional planning to make homes more affordable.
Tsur Somerville, director of the centre for urban economics and real estate at the University of British Columbia's Sauder School of Business, said he also doesn't believe there's a real estate bubble, largely because there's not an explosion in housing starts, typical for real estate bubbles.
Somerville said while the affordability numbers have been skewed by the higher end parts of the market - "there were double-digit increases in Richmond, Vancouver, Burnaby and West Vancouver, with single-digit increases every-where else" - the region is still expensive compared to other cities in Canada.
"Compared with other cities, that income [$52,800] gets you a house," he said.
"Here, it gets you a condo. That means we're expensive, but that's the reality of what we are. "It's still an expensive place to live, but it's not unaffordable. You'll end up smaller and further away from the core."