There’s nothing that makes a person realize how much their city is just a pebble on a beach that the ocean’s tides are washing over more than going to an international convention about real-estate development. (BLOCK that metaphor, someone is begging right now.)
Three thousand people gathered at the convention centre last week to talk about where global capital is flowing and what kinds of real-estate products it is interested in, using language that is way beyond most of us. But the underlying message was clear in many panels: International investors like Vancouver. They’re going to keep coming. They might even start buying whole apartment buildings, not just condos and houses.
We shouldn’t feel picked on, though. Everyone is everywhere. Canadians are buying American real estate. The Dutch and Germans are buying American real estate. The Australians are interested in Japan. China is buying everywhere.
I wrote about one small piece of the conversation from the Urban Land Institute convention, quoting the mayor and deputy city manager on the issue, among others. (It’s always instructive to hear how your city officials talk to an international audience compared to the at-home one.)
Vancouver will never go back to being a beautiful but sleepy – and relatively inexpensive – town on the West Coast.
It has become one of the new landing sites on the continent for global capital and immigrants, say experts who specialize in what are called “emerging gateway cities.”
Vancouver was ranked fifth in the Americas in attractiveness for foreign direct investment last year by FDI Intelligence, a division of the Financial Times that deals with issues related to the movement of global capital. According to a Thomson Reuters report, the city has brought in $2-billion in foreign-investment venture capital between 1997 and 2011.
It is being highlighted as one of the new global hot spots, along with Houston and Miami, at a massive international gathering of investors, developers, planners and politicians in Vancouver this week.
The top 10 cities that FDI Intelligence identified as landing spots for foreign capital were, in order: New York, Sao Paulo, Toronto, Montreal, Vancouver, Houston, Atlanta, San Francisco, Miami and Chicago.
Like other gateway cities, Vancouver is benefiting from the energy and diversity that brings, said speakers at the Urban Land Institute’s spring meeting, where a focus of many workshops is figuring out where international money is flowing.
But this city has a unique situation that causes international money to have an outsize impact here.
Vancouver’s restricted space for growth, a function of being surrounded by mountains, sea and the American border, means foreign investors are willing to pay higher prices to get part of a limited resource.
“Vancouver is somewhat constrained, unlike Houston, which is on a giant tabletop flat plain,” said Mark Cover, a Houston-based senior managing director at Hines, an international real-estate investment firm. “So capital would look at Vancouver, and whatever piece of the pie it can get becomes more valuable.”
And that creates a downside to the investment benefits, said Vancouver’s deputy city manager.
“We’re seeing a lot of overseas investment buying up real estate – that is creating affordability problems,” Sadhu Johnston told the convention.
Mayor Gregor Robertson acknowledged that it means the city has to put extra effort into trying to funnel foreign money into other sectors besides real estate.
“We’ve got to remain vigilant in directing waves of investment to keep the city livable and to respect the character of the city,” said Mr. Robertson.
The mayor has had to deal with mounting resident opposition to offshore buyers of real estate in his two terms. But those in the condo industry, who are big supporters of his party, insisting that there aren’t that many foreign investors.
Mr. Robertson said he hopes that, as investors get more familiar with Vancouver, they will start to put their money into the city’s tech and other sectors.
“Real estate is a reflexive new-immigrant investment” that will change over time, he believes.
Being a gateway city creates other problems, as well.
For one, there’s a lot of pressure on Vancouver to become a major transfer point for fossil fuels.
“That doesn’t align well with our brand,” said Mr. Johnston.
Secondly, although the city’s huge population of relatively new immigrants is an asset to the city, not all of those new immigrants buy into the city’s brand, he said.
“The ‘greenest city’ does not translate very well to Chinese,” said Mr. Johnston. “Some people come from farms and they don’t want to start farming in their yards. It’s a struggle to translate that green city to different cultures.”
Like other gateway cities, Vancouver has a very high immigrant population, with 44 per cent of the city’s population born outside of Canada and half of that group having arrived in the city in just the past 20 years.
27 responses so far ↓
1 John Geddes // Apr 14, 2014 at 6:19 pm
It is encouraging to hear the Mayor talk about the real drivers that affect our community. I have no doubt that the movement of global capital has had and will continue to have a significant impact on our city. This is a much more productive dialog that dealing with slogans like “affordable housing” that mislead people to believe we can grow our way out of this challenge. The goal of channeling foreign investment from real estate into other sectors is laudable and I hope that the Mayor is serious.
“The ‘greenest city’ does not translate very well to Chinese” — LOL — news flash to Vision, I am not sure that it translates awfully well into English.
2 Everyman // Apr 14, 2014 at 6:34 pm
Quite frankly that doesn’t sound like much of a plan.
3 Kenji // Apr 14, 2014 at 7:02 pm
Well there might not be as much of the Chinese capital, the investor immigrant program is over.
4 concerned citizen // Apr 14, 2014 at 9:30 pm
By now it should surprise no-one that Vision Vancouver values actual capital (the real “green”) over human capital.
“It has to first recognize that when our residential property is used purely for passive investment by other countries, the inability of the younger generation to buy becomes a serious problem. One of my US readers makes this comment: “Society in the form of community is unprotected by laws that have burgeoned as governments have discovered that there is more money in property than in community. The result is that so long as people can be kept just quiescent enough to maintain the civil order, property will remain ascendant.”
http://jonathan-baker.blogspot.ca/2014/04/the-data-obsession-and-boggled-mind.html
5 concerned citizen // Apr 14, 2014 at 9:33 pm
John G:
Behind the all too transparent smokescreen of environmental conscience the real “green” is evident and well understood by the Chinese.
6 boohoo // Apr 15, 2014 at 11:30 am
“We shouldn’t feel picked on, though. Everyone is everywhere. Canadians are buying American real estate. The Dutch and Germans are buying American real estate. The Australians are interested in Japan. China is buying everywhere.”
Certainly. It’s rich listening to the loudest in Vancouver complain about foreign ownership then spend half the year in their Mexican condo.
7 concerned citizen // Apr 15, 2014 at 11:54 am
It does seem a little counter-intuitive. The very folks whose property values are being driven up as a result of this massive dump of foreign capital are the ones speaking out. The younger generation barely show up at public hearings to protest being priced out of the market. They seem content as long as Vision builds them bike lanes and skateboard parks.
8 Mark A // Apr 15, 2014 at 12:33 pm
@concerned7
Rest assured that though the younger generation has better things to do with their time then sit around in public hearings and listen to the grey hairs pine to return to an time that never really was, many of us still actually care to vote. (And probably to vote for different folks than you will, judging by the dismissive comments. A more livable city for the long term holds more value to those who will hopefully still be here in 40 years.)
And there are other ways to express one’s opinion other then spending valuable hours sitting around in person. At the end of the day, all public consultation efforts are more or less compressed into a single spreadsheet of opinion data for decision makers to work with.
Your opinion represents a single point of data whether you email, call in, send a letter or waste an evening/work day sitting around for your chance to speak.
9 rph // Apr 15, 2014 at 12:42 pm
@Kenji #4. No the immigrant investor program is still alive and kicking. Quebec is still running theirs, and past history shows that most of the applicants simply loaned Quebec their money, and settled elsewhere.
Interesting though that Quebec has capped applications from any one country to 68% of the allowable total. No guessing as to which country this is.
10 Helena Handcart // Apr 15, 2014 at 12:43 pm
It the mayor thinks that the way to a liveable community is selling million dollar condos to one another, we are in more trouble than I thought. This council thinks that the best use of city land is not parks, but parking lots, that is until a developer friend comes along with a bag of money.
11 concerned citizen // Apr 15, 2014 at 1:12 pm
Too bad the “hacks” at City Hall to borrow a term from Gregor, are more interested in attracting foreign capital than keeping our city liveable.
12 Kenji // Apr 15, 2014 at 1:15 pm
Hi RPH
I know that Quebec is still running theirs, but the feds cancelled. The story got quite a bit of play in the Chinese press:
http://www.scmp.com/news/world/article/1426368/canada-scraps-millionaire-visa-scheme-dumps-46000-chinese-applications
13 tedeastside // Apr 15, 2014 at 1:33 pm
vancouver really is an innovation waste land,
vancouverites are not interested in building businessses, that sleepy town is all about the quick buck,
Real Estate comes first, everything else including god is an after thought
whats up with the greed in vancouver, notice how every single gas station in the whole city is the exact same price right down to the cent…
in other cities like Seattle, theres up to a 20% difference between gas station prices….somethings rotten in vancouver
14 teririch // Apr 15, 2014 at 2:38 pm
“That doesn’t align well with our brand,” said Mr. Johnston.
****
Whose brand? And who determined this ‘brand’?
15 Threadkiller // Apr 15, 2014 at 7:19 pm
“International investors” have been buying apartment buildings in Vancouver for a long time, Frances. If you lived in Vancouver, especially in the West End, in the 70s, a common topic of dinner-party conversation was who had the worst “Hong Kong landlord”. Assorted horror stories routinely made the rounds. I must have had one of the more benevolent HKLLs. At least they kept a live-in manager on site and the building was properly maintained. By all accounts, that was unusual…
16 teririch // Apr 15, 2014 at 9:44 pm
@Threadkiller #15:
The 90’s saw HK RE investment in Vancouver – expectations leading to the HK changeover.
You may remember the stories about the dark windows in several condo towers downtown – nobody lived in them.
17 Richard // Apr 16, 2014 at 12:56 pm
@teri
Well, looks like at least two people are living in or at least spending some time together in those allegedly “empty” condos.
http://www.vancouversun.com/touch/story.html?id=9702652
18 Richard // Apr 16, 2014 at 1:00 pm
@13 tedeastside
Well, if you don’t like the price of gas, the best way to send the oil companies a message is don’t buy gas and support improving transit, walking and cycling so others aren’t forced to buy gas.
Don’t buy the overpriced chips and pop from them either. That’s how they make a lot of their money. Buy the stuff from mom and pop corner stores instead.
19 teririch // Apr 16, 2014 at 2:00 pm
@Richard #17:
Okay – if your posted article remotely relates to what took place in Vancouver in 1997/98/99….?
I guess the empty condos of then are no more real than now:
From an article in the South China Morning Post; June 2013
In parts of Vancouver an estimated 23 per cent of flats are empty because the buyers “are so rich they don’t even care about the return on their investment”.
….’ Some speculate that local developers are building one-bedroom flats specially targeted for the foreign investor market, instead of first-time buyers who will live in the flats.’
Full story here:
http://www.scmp.com/property/international/article/1258574/rich-foreign-investors-drive-home-prices-vancouver-locking
20 teririch // Apr 16, 2014 at 9:25 pm
@Richard
One more comment for you…
You are running the same ‘HUB’ playbook for support of eco-density as you do for the bike lanes.
21 Kirk // Apr 16, 2014 at 10:37 pm
It’ll be very difficult to get foreign investment into anything other than real estate here. We can’t even get domestic investment into anything other than real estate.
22 tedeastside // Apr 18, 2014 at 5:21 am
kirk makes a good point….why are vancouverites so lazy, non ambitious and risk averse
23 Kirk // Apr 21, 2014 at 12:39 pm
I dont think it’s laziness or lack of ambition. It’s normal economics of risk and reward.
If I ask an investor to fund my startup biotech company, it means a big risk, lots of costs, personnel and benefits, trials, betas, years of waiting, regulations, competition, etc.
Or, that same investor can put 5% down on a dozen condo assignments and double/triple his money in a year, relatively risk free.
24 Terry M // Apr 21, 2014 at 4:33 pm
“That doesn’t align well with our brand,” said Mr. Johnston.
****
Whose brand? And who determined this ‘brand’?”
EXACTLY!
These City of Vancouver, VISION appointed jerks , are acting as if they are managing a private corporation!
Gregor the Effiing hoping mayor LOL!
25 mike D // Apr 23, 2014 at 12:42 pm
The foreign investors will leave if and only if the market is suddenly seen as un-safe. That only happens if we have prolonged downturn in real estate performance. For now, it’s a self fulfilling prophecy. Up and up and up some more!
But… nothing lasts forever. At some point, the market will turn, and investors will lose money. Then many of these investors might pull out, or at least stop buying.
Lots of ‘ifs’ in there though… impossible to predict if and when it will happen. For now it will continue to rise unless something is actually DONE about it. (like restrictions on foreign ownership?)
26 concerned citizen // Apr 23, 2014 at 10:21 pm
A correction in the real estate market will not be enough make Vancouver real estate appear to be an unsafe investment. That would take political instability. Restrictions on foreign ownership are unlikely in the current political climate. As long as Vancouver’s tin pot politicians have the power to create vast fortunes with with the stroke of a pen they will keep doing it. It must be a real power trip to do that.
27 Kirk // Apr 24, 2014 at 1:28 am
I think the Vancouver brand is about becoming the Monaco of the West.