IS IT REALLY A BUBBLE? - Rennieforms.rennie.com/RMS/2012 UDI Speech.pdf · IS IT REALLY A BUBBLE?...

IS IT REALLY A BUBBLE? TABLE OF CONTENTS

(KEY POINTS FROM THE SPEECH HAVE BEEN HIGHLIGHTED FOR YOUR CONVENIENCE)

1. DILEMMA P. 1 2. START P. 1 3. LET’S GET POLITICS OUT OF THE WAY P. 1 4. WRONG FOR A DAY P. 2 5. OLYMPIC VILLAGE P. 3 6. WHAT IF IT’S NOT A BUBBLE P. 4 7. OLD & NEW ECONOMY P. 5 8. IMPACTING GREATER VANCOUVER’S REAL ESTATE MARKET P. 5 9. POPULATIONS P. 6 10. CMHC AND FUNDAMENTALS P. 7 11. MERCEDES BENZ SITE P. 7 12. 4 FACTORS P. 9 13. MAINLAND CHINA P. 9 14. DIFFERENT FROM PREVIOUS GENERATIONS P. 10 15. THE 1% P. 10 16. 69% FIRST TIME HOME BUYERS P. 11 17. MARINE GATEWAY P. 12 18. WE SHOULD ASK OURSELVES, WHERE WOULD RENTAL RATES BE AND

WHERE WOULD SUPPLY OF ANY CONSEQUENCE REALLY COME FROM WITHOUT THE PASSIVE INVESTOR.

P. 14

19. WHERE DO THE DEPOSITS COME FROM? 67% FROM SAVINGS, 11% FROM A LINE OF CREDIT, 15% FROM PARENTS AND GRANDPARENTS.

P. 15

20. WHY BOTHER BUILDING A BRAND? P. 17 21. ALSO AS VANCOUVER AND NEIGHBORING CITIES PUT THEIR TASK

FORCES TOGETHER TO CREATE AFFORDABLE HOMEOWNERSHIP MODELS WE HAVE TO REMEMBER THE BIG BARRIER TO ENTRY IS NOT THE PAYMENTS BUT THE DOWNPAYMENTS.

P. 17

22. $88,000,000,000 P. 18 23. WE ALREADY KNOW THAT 69% OF SALES ARE TO EXISTING PROPERTY

OWNERS. NOW CONSIDER THAT SINCE 2006 OVER 70% OF THE 69% BOUGHT A MORE EXPENSIVE HOME THAN THEIR LAST HOME.

P. 19

24. PREDOMINANTLY TRADING DOLLARS MORE THAN IT IS RELIANT ON LOCAL INCOMES.

P. 20

25. THE AVERAGE SALE PRICE FOR THE TOP 20% OF 2011 CONDOMINIUM SALES WAS $877,000 AND THOSE 3900 CONDOS REQUIRE A HOUSEHOLD INCOME OF $125,000 PER ANNUM. BUT LOOKING AT THE REMAINING 80% EXCLUSIVELY, YOU WILL SEE THAT THE 15,720 SALES HAVE AN AVERAGE OF $315,000, REQUIRING A HOUSEHOLD INCOME OF ONLY $52,900 PER ANNUM.

P. 21

26. THE BIG SINGLE FAMILY STAT IS THE 4,500 IN THE TOP 20% GROUP WENT UP BY 25% WHILE THE 18,000 HOMES IN THE LOWER 80% ONLY INCREASED BY 11%.

P. 24

27. TASK FORCES P. 24 28. IN 1987, A NEW HOME WAS PRICED AT $87,500 IN EAST VANCOUVER. 25

YEARS LATER THAT HOME IS WORTH $1.3 MILLION DOLLARS. THAT’S A 1500% RETURN. A RETURN OF 11.4% COMPOUNDED YEAR IN AND YEAR OUT.

P. 25

29. AFFORDABLE HOMEOWNERSHIP AS A REGIONAL PROBLEM

P. 25

30. I BELIEVE THE REGION MAY NEED A TASK FORCE AND THATAFFORDABILITY WILL EVENTUALLY BE SOLVED BY TRANSIT, TRANSIT OR TRANSIT.

P. 25

31. SO LET’S GET GREGOR INTO A ROOM WITH ALL OF THE OTHER MAYORS AND PLANNERS OF THE REGION AND WORK TOWARDS A REGIONAL SOLUTION TO AFFORDABILITY AND HOMELESSNESS.

P. 26

32. IN 10 DAYS WE WILL LAUNCH ROBERT FUNG’S TRAPP+HOLBROOK ON COLUMBIA STREET IN NEW WESTMINSTER. ROBERT SAVED GASTOWN AND THEY WILL DO IT AGAIN IN NEW WEST.

P. 27

33. TRAPP+HOLBROOK IS ALSO ATTRACTING THE BABY BOOMER WANTING A COMMUNITY. WITH THE 55‐74 YEAR OLD CONSOLIDATING AND THE FIRST TIME BUYERS TAPPING INTO MOM AND DAD’S EQUITY, IT GOES SOMETHING LIKE THIS:

P. 27

34. VANCOUVER P. 28 35. FOR NEXT YEAR, 2013, DOWNTOWN WILL DELIVER ONLY 486 CONDOS IN

2 DEVELOPMENTS. ALREADY 70% SOLD, THESE RECORD LOW COMPLETIONS ARE THE EVIDENCE THAT IN 2008, THE BUILDER, BANKS, AND BUYERS ALL LOST CONFIDENCE.

P. 28

36. RYAN BERLIN AND ANDY RAMLO OVER AT URBAN FUTURES HAVE CONVINCED ME THAT WE WILL HAVE 94,000 NEW RESIDENTS IN VANCOUVER, NOT GREATER VANCOUVER, BUT VANCOUVER. ALL OF WHO WILL REQUIRE 53,000 NEW DOORS, CONDO, AND HOUSES OVER THE NEXT 12.5 YEARS.

P. 29

37. LET’S LOOK AT VANCOUVER AS A WHOLE AND THEN THE REGION AS A WHOLE.

P. 29

38. MORE DENSITY DOES EQUAL MORE AFFORDABILITY. DOES MORE DENSITY EQUAL LESS PROFIT FOR THE DEVELOPER?

P. 30

39. SURREY P. 30 40. BURNABY P. 30 41. RICHMOND P. 31 42. BRANDING P. 31 43. A PLACE WHERE IDEAS ARE GENERATED, INTELLECT IS MOVING HERE

BUT THEY WILL ONLY STAY HERE IF THEY ARE CULTURALLY STIMULATED. P. 31

44. BUT LET’S WRITE OUR OWN PAPER ON SOCIAL SUSTAINABILITY. DIVERSIFIED COMMUNITIES, MIX‐USED COMMUNITIES AND THE FUTURE OF THE BABY BOOMER. CONDOS DON’T KILL. PEOPLE KILL.

P. 32

45. JIM GREEN P. 32

IS IT REALLY A BUBBLE? Maureen, could I get you back up here, seriously, I do not think that everybody in this room understands how you protect us and like a really good mom. You protect them from what we want and give us what we need.

1. DILEMMA • Here’s my dilemma and also a cultural observation. • Today, more than ever, you do not need any data to be

negative ‐ • you just need a blog comment. • To be positive today, • you need data because nobody wants to believe it.

2. START

• I never know where to start. • I ask myself, why do I do this? And there really isn’t just

one answer. However, I do believe that beyond the obvious privilege of being asked to speak today, my talk here at UDI is somewhere between a hundred plus hours of research and writing, breaking in a new act and some sort of public therapy.

3. LET’S GET POLITICS OUT OF THE WAY • In the “breaking in a new act” department, let’s get the

politics out of the way. • What I see going on out there provincially, is very

confusing to me. • My political education is derived in part from a table at

the Four Seasons – everyday I walk in and somebody will explain to me the lay of the land,

• the state of the world, • the odds,

P 1 MAY 17, 2012 UDI SPEECH – BOB RENNIE’S SPEAKING NOTES


• the polls, • the trends • but mostly, their political predictions. • Two weeks ago, a prominent business leader grabs me

and says, “Bob, politics is a horse race. Bob, do you know HOW to win at a horse race?”

• I manage to get 2 words in, “I‐‐‐I‐‐‐“ • He’s almost yelling at this point, “Listen to me, I’ve been

around a lot longer than you. “ Again, “How do you win at a horse race?”

• My inner voice says, “I’ll go with dementia for $50, Alex.” • Instead I go with, “I don’t know, don’t bet on your

favorite colour!” • He says, “You bet on every horse!” • Politely, while walking away, I manage to find my

composure and blurt out, • “The only win would be to say you won.” • And there lies the problem. • Seriously, when my son’s soccer team was in trouble or

having a bad game, I didn’t not cheer for the other team. For what? To brag over beer that I picked the winner?

• Whether it is politicians or housing, both topics need the intellect of this room.

• Politicians require constructive solutions. • Housing requires constructive solutions. • Not sound bites.

4. WRONG FOR A DAY

• I tend to run my life with, • “I would rather be wrong for a day and right for a lifetime • with conviction” • than, “Right for a day and wrong for a lifetime • with a sound bite.”


5. OLYMPIC VILLAGE • A little like the Olympic Village, it just needed somebody

to stay on message. • Now that we have sold 516 out of the 737 with only 222

to go. • Everyone is telling me, “I never doubted it Bob, it’s on the

water!” • Inner voice again, • “Where the #@$% were you when I needed you??” • With the Olympic Village, Ernst & Young agreed to

accelerate the phasing and let us bring on the front row seats 6 months ahead of schedule.

• We launched Canada House. • 40 Arthur Erickson, • waterfront homes. • 32 of 40 sold over the last 10 weeks, 32 sales with just

over $78 million dollars in revenue, breaking $1100 psf. • If you haven’t been down to the Village lately, • grab a coffee at Terra Breads and you will understand

why we never doubted it. • My company’s job was to protect that asset. • All of us at Rennie considered our newly named, • “Village on False Creek” quite possibly, • the most watched and quite possibly career making or

career breaking assignment in our company’s history. • We took a huge marketing risk that we can now talk

about. • I went out to the media • without permission from E&Y, the manager, • and without permission from the lender, the City of

Vancouver, • our kick off campaign was “IT’S NOT A GHOST TOWN.” • There was no focus group needed for that one. • We purposely call the Village


• a “Ghost Town”. • Deliberately placing a cloud over the Village, a cloud that

we could remove allowing the consumer and the media and this room,

• to measure the success of the Village by counting the coffee cups littering the plaza.

• By tracking the population of the Village, • taking the spotlight off the politics and revenue, • it allowed us to do our job. • The asset was protected, • revenue was protect • and the Vancouver taxpayer is protected.

6. WHAT IF IT’S NOT A BUBBLE

• Every year there is always a brand risk associated with the title of my UDI talk.

• This year was no different. • Should we be influenced by David Baxter? • Who is the smartest person I know – • David told me only two weeks ago at Campagnolo on

Main over dinner – • “Bob, when you are up there, you just tell them that they

should be begging, BEGGING developers to build!” • Or do we go with the Globe and Mail’s April 14th story, • quoting an Arizona accountant/blogger, • “Ben Jones”, • warning us violently in print – • VIOLENTLY, that Vancouver and Toronto are in a housing

bubble that just hasn’t burst yet. • Paralleling us to his state. • Ben can be reached at

SPEAKERSWITHOUTTHEFACTS.COM/IRRESPONSIBLE. • We are going to stick with today’s title “What if it’s not a

bubble?”


7. OLD & NEW ECONOMY • Today, I want to really look at the baby boomer and how

this • 48‐66 year old has changed their buying habits forever. • I will continue to break out • baby boomers, banks, and builders • into the old economy, pre‐September 2008, when we

were unconscious. • And the new economy, post‐September 2009 where

being unconscious is not an option. • I believe that the leaner and meaner baby boomer is the

game changer. • When it comes to baby boomer, I am not sure whether

they are leaner and meaner • but I do think they are definitely lumpier and grumpier.

8. IMPACTING GREATER VANCOUVER’S REAL ESTATE MARKET

• Along with the baby boomer, • we should try to understand • the impact of • foreign economies, • immigration, • cultural trends, • affordability, • first time home buyers, • and aging populations on the real estate market.

9. POPULATIONS • I told you last year and it’s worth repeating, • as a private citizen – think property taxes, think

healthcare. • As a developer, you should think wider doorways, think

more storage space. • Because in years 2009‐2018 in BC, we are going to see • the 55‐64 year old population increase by 38%. While we

watch • our 65‐74 year olds increase by 56%. • And our workforce, the taxpaying, baby making • 35‐54 year old population grow by only 4.6%.

POPULATION STATISTICS FOR THE AGING BABY BOOMER

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

65‐74 YEAR OLDPOPULATION INCREASE = 56%

35‐54 YEAR OLD POPULATION INCREASE =

4.6%

55‐64 YEAR OLD POPULATION INCREASE = 38%


10. CMHC AND FUNDAMENTALS • I joked with the CHMC’s board a couple of years ago, that • the Vancouver market never went up on fundamentals,

so why would we go down on fundamentals. • However, our market really does have fundamentals but

our fundamentals cannot be captured • in a 90 second elevator conversation. • At the water cooler, • in a sound bite, • and especially not on a blog or 140 character tweet. • I do have a huge concern over what Tracie McTavish, the

president of our company calls, your “Keyboard Courage”, referring to what is becoming a dangerous and apparently acceptable practice which is,

• negative market commentary that is nothing but speculation.

• Speculation made by spineless, signature‐less, individuals on a blog, on a blog that in most cases has less than 500 followers.

• Then the next thing you know, the mainstream media picks up on the negative as fact and all of a sudden, it’s breaking news and our industry spends the next 6 months attempting to dispel the rumors and sound bites.

• Think Olympic Village.

11. MERCEDES BENZ SITE • Only two weeks ago, CBC called and wanted an on

camera interview on the topic of the Mercedes Benz site at Broadway and Hemlock, selling for a reported $30 million dollars.

• The story had legs all because of a sound bite from a “prominent developer” that was crying foul play that money from Mainland China was upsetting the marketplace.

• This “prominent” developer, who was not named, does actually benefit from China in their own company’s condo sales.


• That was a test, if you are really paying attention, you should be questioning if Bob doesn’t know the developer’s name,

• does Bob know the developer benefits from Mainland China and their condo sales.

• Well, I do, because • IT’S NOT A HOBBY. • Possibly everyone in this room benefits directly and

indirectly from those heavily scrutinized Mainland China buyers.

• The reason why a site like the Mercedes Benz sold for well over the $23 or $24 million the locals would pay, is simple, the Mainland China buyer saw a long‐term hold and a commercial value beyond instant condo development gratification.

• 15 minutes after CBC and I spoke, they killed the story as “Just sour grapes.”

• This wealth is not restricted to housing. • I believe that there is a cultural shift happening that we

are not prepared for and it has only just started. • An unnamed journalist over at the Globe emailed me

while I was writing today’s talk and asked me for comments on a story towards the decline of buyers from Mainland China.

• That one other realtor had commented and attributed the decline to bad economic conditions in China and the tightening flow of money.

• Let’s be very careful here, when money is allowed to flow, it flows.

• When money is not allowed to flow, it really flows. • As China slows down to 7% growth, • that unprecedented wealth accumulation now has time

to diversify!


12. FOUR FACTORS • When it comes to the high‐end, • China‐focused, private school neighborhoods, maybe, just

maybe it is time for those neighborhoods to catch their breath.

• We believe that there are 4 factors influencing those markets.

• One – Listings are up as locals want to cash out. Think Baby Boomer.

• Two – Realtors taking listings priced to the highest level, crazy sale. Think commission.

• Three – Currently, there are less buyers and this is compounded further by the

• Fourth – The sense of urgency is gone. • Last week there were 553 listings west of Main, priced

over $2.5 million. 12 months ago, there were 288. • When an overpriced listing that is priced higher than the

last market anomaly ‐ high sale sells for less. • Is this really a market correction? • Here again, sound bites are much more provocative than

the facts. • Still today, • if a listing is priced right, on the right street, there are still

multiple offers.

13. MAINLAND CHINA • The buyer from Mainland China is becoming a lot more

sophisticated • and similar to the Hong Kong buyer of the 90’s. • Once the Mainland China buyer goes to dim sum 4 times,

the learning curve is breathtakingly quick • to regionalize and rationalize – and start to criticize just

like the local population. • Maybe equal to this room taking four Westjet flights to

Palm Springs or Pheonix. • Just like dim sum, 4 flights and you’re an expert.



• Watch the anomalies and crazy sales become far less frequent than the initial wave.

• Think back to previous generations when our Italian,German, Croatian, and Jewish grandparents first upset the market.

.

• There’s a difference this time • that separates the conversations around Mainland

Chinese buyers from previous generations that really should be addressed.

14. DIFFERENT FROM PREVIOUS GENERATIONS i. ‐‐‐the supplyii. ‐‐‐the iPhone iii. ‐‐‐Facebook iv. And our inability to absorb change when it comes

to supply. a. Vancouver will not create another

single family lot in your lifetime unless a house on 2 lots is torn down.

b. How many cities could possible live up to such a statement?

c. San Francisco? Manhattan? Paris?d. Different from previous generations,

we communicate using the iPhone and Facebook.

• The voices of earlier generations were very civil, theywere tempered.

• Maybe a handwritten letter to the newspaper editor or to your City Councillor would be received within a week of protesting

• Everything was diffused by mail delivery with previous generations.


15. THE 1% • In the same vein, Occupy Wall Street is a whole new way

for the 99% to be heard. • Occupy Wall Street is the legitimate outrage of why 30

people get multi‐multi‐multi‐million dollar bonuses at the expense of the 6000 workers being laid off.

• Certainly not our Occupy Vancouver rainbow coalition with no focus, with banners like my personal favorite, CONDOS KILL.

• What I have learned from the 99% is that as recent as 20 years ago,

• the 1% in all likelihood influenced 40%, even 50% oftrends, culture, and the vote. Well, it’s a new day with iPhones, Blackberries, Facebook, and Twitter.

• Yikes it’s One Man – One Vote.• This change can already be seen locally in the power of

the community groups when it comes to development, actually causing moratoriums.

• The 1% vs the 99% is as big a cultural shift as 9/11 to me. • 60% of the 99% are very, very smart. • I think that we should be listening very carefully to what

the 60% are saying and we should be watching what the 60% are watching.

• Also different from previous immigration bulges, there is a reason why we are having difficulty with our ability to absorb change. And that is that Greater Vancouver’s demographic breakdown is very unique.

• Most cities with this much attention from foreign buyers have much, much larger populations. They are better able to absorb the in‐migration. Think New York, think London, think urban resort.

16. **69% FIRST TIME HOME BUYERS

• In 2011, out of • 42,450 multi‐ and single family sales in Greater

Vancouver,


• 69% of all homes were purchased by existing propertyowners.

arine

• This leaves us with 31% being first time buyers. • We have to question how local incomes within the 31%

actually purchase real estate in Greater Vancouver and participate in all these pre‐sales.

17. MARINE GATEWAY

• To get some answers on affordability and ability, • we have some very telling buyer stats from Andrew

Grant and Dan Turner and PCI’s success story at MGateway.

• Then I will take you through the 2011 sales that helpdispel the sound bite that we are “the most expensive place on earth.”

• With Marine Gateway, • I went out to all 414 buyers with a very exhaustive

survey. We received an unprecedented 170 responders out of the 414 sales.

• I think the marketplace needs us to open the vault a bit here and share the consumer data obtained from our Marine Gateway Buyers Survey.

• 66% of our buyers were from Vancouver. • 16% from Richmond, • 9% from Burnaby.• By gender, • 54% men, • 46% women. • By age, • 29% 50‐70, • 44% were under 40 years old. • As we became confident of 95% plus sales success on

opening day, we went out to the media as the database grew to 11,000.

• The consumer was letting us know they wanted it all – the entire package. Theatres, T&T, shops, and Canada Line.


• The media just didn’t want another condo story

ard,

g.

• but a cultural shift and changing trend. • Affordable home ownership. Now that’s another story. • I positioned Marine Gateway in the media with a

narrative. • Something like this: • In the 70s & 80s it was location, location, location. • In the 90s through mid 2000s it was timing, timing,

timing and from here forw• its transit, transit, transit. • The real Olympic legacy was conditioning us to use

transit. The week leading up to opening day was crazy ‐ print, TV and radio ran all with the transit headlines. Bill Good had 2 or 3 talk shows highlighting the topic of Marine Gateway and transit oriented developments.

• Our surveys use a 3 point rating scale of: • Not Important, • Important, and • Very Important. • The survey revealed TRANSIT with 72.5% of Marine

Gateway buyers identifying the Canada Line as Very Important.

• Marine Gateway had confirmed this with 105 sales of 414 with no parkin

• Listen carefully to the baby boomer. • They may be saying, “we really only need one car and

with the condo, we walk so much more.” • But what they meant to say was, “it’s our golf dues or it’s

2 cars.” • If you are over 40 and more so if you are a babyboomer,

you consider the cost of fuel, insurance and maintenance of a car when considering reducing the household from 2 cars to 1 car.

• If you are under 25, you don’t own a car because it’s an inconvenience and you care about the environment. Unlike the 1950s, you do not need a car to find out where your friends are and the reality is, youth has


replaced their dependency on the automobile with their dependency on an iPhone.

• Unlike their moms and dads, today’s youth do not require a car to get laid.

country.

d.

• Marine Gateway had a huge responsibility as the densityposter child being the first major development on the Canada Line and the Cambie Corridor. This most likely contributed to the Woodward’s type media attention.

• I do remember in late 07 or early 08 having lunch withBrent Toderian, our former City Planner. Then under Sam Sullivan saying, “it’s the poster child for eco‐density.” The word “eco‐density” is like a disco ball. Now as the other 3 Cambie and Marine corners come before council, the heavy lifting and moving the community towards change has been accomplished by PCI’s perseverance.

• And the consumer has spoken: 38% End Users, 62% Investors.

• If half of these investors sell or put family into theirMarine Gateway condo, this will actually create 128 apartments towards Vancouver’s rental stock.

• There is so much criticism about the “investor”.

18. WE SHOULD ASK OURSELVES, WHERE WOULD RENTAL RATES BE AND WHERE WOULD SUPPLY OF ANY CONSEQUENCE REALLY COME FROM WITHOUT THE PASSIVE INVESTOR.

• Rental is very difficult to pencil out on the most expensive land in the

• I am watching the Aquilini’s Rogers Arena closely and the conversations with the City.

• Do they pay $40 million in CAC’s or just build 500apartments as pure rental?

• Back to the Marine Gateway survey, continuing on therental supply track.

• 109 out of 414 were first time investors – this first‐time investor is now a real demographic.

• The first time buyer who just wanted a home and one day not have to pay rent or a mortgage has change


• This buyer now has to understand that unlike his mom and dad,

• Vancouver housing competes with gold, 1% term deposits and the uncertainty of the stock market.

• Approximately 70 of our 414 buyers own 2 or more condos. 53 of the 414 have another pre‐sale purchase in the pipeline.

19. WHERE DO THE DEPOSITS COME FROM? 67% FROM SAVINGS, 11% FROM A LINE OF CREDIT, 15% FROM PARENTS AND GRANDPARENTS.

• To me the money from family is the statistic to watch. Give me a minute and I will delve further in how the family money statistic will change any analysis of the first time buyer being purely income‐based.

• On opening day at Marine Gateway, Brian Coxford of Global TV asked me if we could find a buyer that was writing an offer.

• I walked over to a 60‐something year old couple that in “investor profiling” you would call an “investor”.

• The lady covers her face and runs away saying, “no, I cannot be on TV!”

• I later found out she called in sick at work to get in line. • This couple lives at 63rd and Cambie. They want to stay in

the neighborhood. • In fact, 23% came from the development’s own postal

code and the neighboring postal code. And 33% from the 5 adjacent postal codes.

• The problem is that these buyers just do not bother to show up and balance out 6 days of public hearings.

• We asked the language spoken most often in your household?

• 48% marked Cantonese or Mandarin and 46% marked English.

• 405 of our 414 buyers had BC Drivers Licenses and local banking.

• On buying habits, • 75% of our buyers already own a home, a little higher

than the 69% average over the past 6 years. • 82% of the buyers currently do not live in condos.

MARINE GATEWAY SURVEY– 41% OF BUYERS FROM THE DEVELOPMENT’S OWN POSTAL CODE PLUS THE 5 ADJACENT POSTAL CODES

V6P15%

V6X8%

V5Y8%

V5Z5%

V5E3%

V6M2%

OTHER 59%



20. WHY BOTHER BUILDING A BRAND? • When it comes to the developer, 71% said PCI was

Important or Very Important! • When it comes to the marketer, the unaudited survey

said, 103% said RENNIE was the only reason they bought

ria.

• OR • we could go with the real survey that said that 66%

thought Rennie Marketing Systems was Important or Very Important!

• The number one source these buyers relied on was “Friends and Family”. The number one source that “Friends and Family” relied on – you may want to get out a pen.

• Here’s my cell number – because it’s not a hobby.• If we understand buying habits, we can then understand

product design.

21. ALSO AS VANCOUVER AND NEIGHBORING CITIES PUT THEIR TASK FORCES TOGETHER TO CREATE AFFORDABLE HOMEOWNERSHIP MODELS WE HAVE TO REMEMBER THE BIG BARRIER TO ENTRY IS NOT THE PAYMENTS BUT THE DOWNPAYMENTS.

• Think about it – with banks tightening their lending criteria and oversight of pre‐sale contracts, it’s not the payments, it’s the down payments.

• Will any financial institution offer construction financingof any scale to “nothing‐down buyers”? Or to developments with high percentages of 5% deposits for 5% down buyers?

• The first time buyer gets pushed out of the market by this tighter lending crite

• So where does the first time buyer fit in with the pre‐salegiven the breathtaking amount of pre‐sales with 15%‐25% deposits?

• Well the Marine Gateway number that stood out was 15% of buyers obtained their down payment from parents or grandparents.


• Marine Gateway’s average deposit was 20%. • We looked at a good sampling of buyer deposits from 13

recent pre‐sale developments representing 3925 sales to understand how many have 5% or 10% deposits.

g.

• We looked at Terry Hui’s Park Place in Surrey and Met in Burnaby. We also included Peter Redekop’s Varsity in Langley, Intracorp’s Metro and Silver in Burnaby, Peter Wall’s 2300 Kingsway and WCFC, Colin Bosa’s Lido on Main Street and Sovereign in Burnaby, and Nabih Faris’ Kits360 and PCI’s Marine Gateway.

• Of the 3925 homes, • 82 sales – 2% have 5% deposits and • 81% have 10% deposits. Also if you remove Varsity in

Langley and Park Place in Surrey, there are only 14 sales with 5% deposits or 1/3 of 1% of sales.

• If pre‐sales really do have first time buyers, are the babyboomers, mom and dad and grandparents becoming a real source of funds?

22. $88,000,000,000

• I believe that the baby boomer and their parents are now so risk adverse that they are taking their money offthe table and consolidatin

• The first time buyer is a benefactor of this agingdemographic.

• I wanted to apply some reality to my theory. • I called my friends Andy Ramlo and Ryan Berlin over at

Urban Futures. • Andy and Ryan do all of my population and census

gathering year after year. • Andy and Ryan’s challenge was to find out for me the

value of the clear title primary residences owned by 55‐74 year olds.

• When I received the data, • I wanted to call Maureen and re‐title today’s talk and

have t‐shirts made that said –


• MOM AND DAD BOUGHT A HOME IN 1978 AND ALL I GOT WAS A LOUSY ONE BEDROOM CONDO (AND SO DID MY SISTER).

eir

• In Greater Vancouver, there is $88 billion, • $88 billion dollars in clear title homes and condominiums

currently owned by 55‐74 year olds. • This $88 billion dollars represents 113,000 primary

dwellings • with an average value of $777,000. • Not only is the $88 billion breathtaking, it also represents

a 33% increase since 2006. • In 2006, the $88 billion was $66 billion and the average

home value wasn’t $777,000, it was $586,000. • Also, this $88 billion dollars in equity does not include

the homeowners with $10,000 or 10% left owing on thhome.

• It also does not include the $36 billion in clear title primary dwellings owned by the trailing baby boomers 45‐54 year olds.

• A very safe assumption would be that this equity will be freed up over the next 15 years because my 55‐74 year olds will be 70‐89.

• The $88 billion has to be freed up to maintain • many unsustainable lifestyles and • then to help the kids.

23. WE ALREADY KNOW THAT 69% OF SALES ARE TO EXISTING PROPERTY OWNERS. NOW CONSIDER THAT SINCE 2006 OVER 70% OF THE 69% BOUGHT A MORE EXPENSIVE HOME THAN THEIR LAST HOME.

• I would say that this trend of upgrading will drop everyyear for the next 15 years.

• Over the next 15 years, we will see this $88 billion dollars in equity split out somewhere between

• A – a transfer of wealth, • B‐ buying new home that is a buy down and also


• C‐ largely to maintain a lifestyle that one has become accustomed to.

• I believe that this room’s success will be to understand what this risk adverse buy‐down, baby‐boomer will buy next.

• It is becoming very obvious that Vancouver and Greater Vancouver real estate is really equity driven.

24. PREDOMINANTLY TRADING DOLLARS MORE THAN IT IS RELIANT ON LOCAL INCOMES.

• Yet all the sound bites when it comes to the topic of affordability and homeownership are income based.

• Incomes are a factor but the way we talk about themshould change.

e.

• Seriously, if all Greater Vancouver sales activity was just about incomes we could have the UDI’s AGM at Denny’s.

• The fundamentals of the Greater Vancouver marketplace just cannot be captured in an elevator conversation.

• Continuing this year from where I started last year, withdata provided by Darin Neilsen, Rudy Neilsen’s son at LandCor,

• the data will prove out how the top 20% of LowerMainland sales falsely skew all the conversations around affordability.

• It looks at how that top quintile actually fuel all of the least affordable and bubble talk around national statistics, local media, skepticism, and negative questioning by financial institutions back east.

• I went on a quest to understand what if I broke out our local sales from statistics that I stumbled across:

• In 2010 ‐ housing went up in Canada 8.9%. But when Iremoved Greater Vancouver from the analysis, that 8.9% dropped down to only 4.3%.

• I will show you now, • how the top 20% of sales does mislead and most likely

act as a deterrent to head offices locating her


• When topics like employee housing and cost of living arebrought up in the boardroom, here are the numbers that will put everything into perspective for you.

,000.

• For Greater Vancouver, last year there were 19,000 condo sales. The highest recorded sale was $7,200Compared to my 2010 sale at Fairmont for $17,500,000.

• For Greater Vancouver, the average sale price was $427,000,

• for 2011, that $427K averages requires a household income of $66,000 with $25% down.

25. YET THE AVERAGE SALE PRICE FOR THE TOP 20% OF 2011 CONDOMINIUM SALES WAS $877,000 AND THOSE 3900 CONDOS REQUIRE A HOUSEHOLD INCOME OF $125,000 PER ANNUM. YET THE AVERAGE FOR THE 80% OF SALES THAT’S THE 15,720 SALES, THAT DROPS FROM $427,000 TO $315,000 REQUIRING A HOUSEHOLD INCOME OF ONLY $52,900 PER ANNUM.

• This is a lot of supply that starts to work with localincomes.

• These numbers have to alter any conversation on affordable homeownership.

• One of the most important findings for me was that the top 20% fell by 3% in value.

• While the 80% increased by 1% in value. • This may just be the beginning of a flight to affordability

as the baby boomer starts to buy down single family homes.


BEFORE YOU SAY WE ARE THE LEAST AFFORDABLE – THE AVERAGE PRICE OF CONDOMINIUM SALES IN GREATER VANCOUVER IS $427,000. NUMBERS SKEWED BY THE TOP QUINTILE.

Total number of condominium sales $19,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%3,900 CONDOS ‐ AVERAGE PRICE: $877,000 AVERAGE INCOME TO SUSTAIN: $125,000

15,720 CONDOS – AVERAGE PRICE: $315,000 AVERAGE INCOME TO SUSTAIN: $52,900


• I will give you the single family data with a little less detail.

• 22,800 recorded sales in 2011 with an average price of$970,000

,000

• up 17% over 2010 including the highest recorded sale at $16,800,000.

• The top 20% of sales have a whopping average of $2.15 million requiring a household income of $308,000.

• The 18,000 homes in the lower 80% group of single family homes sales drop from that $970,000 to $674

• Requiring an income of $98,700. income of $98,700.

BEFORE YOU SAY WE ARE THE LEAST AFFORDABLE – BEFORE YOU SAY WE ARE THE LEAST AFFORDABLE – THE AVERAGE PRICE FOR HOMES IN GREATER VANCOUVER IS $970,000. THE AVERAGE PRICE FOR HOMES IN GREATER VANCOUVER IS $970,000. NUMBERS SKEWED BY THE TOP QUINTILE. NUMBERS SKEWED BY THE TOP QUINTILE.

Total number of home sales $22,800 Total number of home sales $22,800

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%4,560 HOMES – AVERAGE PRICE: $2.15 MILLION AVERAGE INCOME TO SUSTAIN: $308,000

18,240 HOMES – AVERAGE PRICE: $674,000 AVERAGE INCOME TO SUSTAIN: $98,700


26. THE BIG SINGLE FAMILY STAT IS THE 4,500 IN THE TOP 20%

GROUP WENT UP BY 25% WHILE THE 18,000 HOMES IN THE LOWER 80% ONLY INCREASED BY 11%.

• Supporting my theory that the top end has to take abreather here, as it is quite possibly overheated.

er.

• What we can extrapolate from all this • Let’s go with the top 20% of condos and single family

homes are probably fueled by current homeowners and foreign money

• while the 80% are supported by a broader base including local incomes plus mom and dad helping out.

27. TASK FORCES • As task forces are put together in every city to explore

affordable homeownership every city and municipality in the GVRD should keep their eye on the 80%

• and really start to look at things differently. • Look at the region and get away from this being each

cities problem. • Look at affordability as a regional issue. • Let’s tear a page out of Gregor Robertson’s playbook –

stay with me here. • 37 years ago when I started, • Vancouver had its higher end areas such as Shaughnessy

and Kerrisdale and affordable homeownership was decanted to East Vancouver.

• That’s 37 years ago, when all of the Westside thoughtthat the City of Vancouver somehow ended at Granville Street and after that was the Province of Alberta.

• Now the Westside children live there, • spending $1.2 million for a home on a short lot off

Commercial Drive. • When I started this career in 1975, a 33 foot lot in East

Vancouver hit $1000 per front foot. $33,000. • I was told very clearly, “IT’S OVER BOB” “YOU MISSED

IT”. It’s ov


• And Arthur Block wouldn’t hire me because I was only 19.

• Today, Arthur is my client and that 33 foot lot is worth

HOME WAS PRICED AT $87,500 IN EAST

H $1.3 MILLION

UT. t of $21,875, that’s a 17.7%

nlikely to be repeated on the interest rate side again.

essy and

$750,000.

28. IN 1987, A NEWVANCOUVER. 25 YEARS LATER THAT HOME IS WORTDOLLARS. THAT’S A 1500% RETURN. A RETURN OF 11.4% COMPOUNDED YEAR IN AND YEAR O

• On a 25% down paymenreturn year over year.

• The baby boomers really did have the best of both worlds. Rising real estate prices and declining interest rates, u

29. AFFORDABLE HOMEOWNERSHIP AS A REGIONAL PROBLEM

• Is Vancouver to a region today, what ShaughnKerrisdale were to Vancouver 37 years ago?

• Are the suburbs to the region today what East Vancouver what Vancouver is 37 years ago?

EVE THAT IT’S THE REGION

up with a solution to affordable

C Housing was to move my affordability

that I have been talking about for the last 5

the most

solution that can be replicated in any community.

30. EVENTUALLY BE SOLVED BY TRANSIT, TRANSIT OR TRANSIT.

WHICH WOULD LEAD ME TO BELITHAT MAY NEED A TASK FORCE.

• We need to comehomeownership

• and one of the many reasons that I accepted going ontothe Board of Bmodel along.

• The oneyears.

• The challenge is to find a solution on some ofexpensive land in Canada. “VANCOUVER”.

• It has to be a


• I would say that homelessness should be looked at the same way.

• Lean towards a regional solution and although Gregor is not here today, he is in Paris at a Sustainability Conference, he gets it.

31. SO LET’S GET GREGOR INTO A ROOM WITH ALL OF THE OTHER MAYORS AND PLANNERS OF THE REGION AND WORK TOWARDS A REGIONAL SOLUTION TO AFFORDABILITY AND HOMELESSNESS.

• The Streetohome Board has raised almost $26 million dollars. Working with Gregor and our Housing Minister, Rich Coleman, StreetoHome has been a Vancouver‐centric solution that should consider expanding into a regional solution.

• The thin ice that everybody is skating on in the DTES is to cause effective change without gentrification.

• Since the Province provides services and health care, the solution has to be a regional solution.

• Nothing in this economy can be done in isolation. • Everything has to be looked at as a whole. There are only

so many tax dollars. • On affordability and transportation – if you watch our

ads: • MANDARIN IN RICHMOND ON THE CANADA LINE – 200

HOMES UNDER $399K • WALL CENTRE FALSE CREEK – WALK TO THE EXPO LINE

OR CANADA LINE – 300 HOMES UNDER $299K

• MARINE GATEWAY – 300 HOMES UNDER $399K • Advertising is just starting for Peter Wall’s Wall Centre

Central Park at the Joyce SkyTrain Station. 349 homes under $349K.

• Next up, Nabih Faris’ Grand Central will launch its 3rd

tower in Coquitlam on the Evergreen Line. 100 homes under $299K.

• Do you see a trend?


32. IN 10 DAYS WE WILL LAUNCH ROBERT FUNG’S TRAPP+HOLBROOK ON COLUMBIA STREET IN NEW WESTMINSTER. ROBERT SAVED GASTOWN AND THEY WILL DO IT AGAIN IN NEW WEST.

• This buyer wants the heritage and community. • This buyer is also really focused on transit and • 100 homes under $299K, $460 psf, that’s almost $300 psf

lower than a new downtown development and $140psf less than Burnaby.

• Trapp+Holbrook is attracting a lot of youth with mom and dad’s cheque book.

jobs.

• You know what I like about New Westminster? • We did three towers in 06/07 with Rykon and it was their

mayor, Wayne Wright who had it figured out. • The council approved building and owning an office

tower on Columbia Street at their new civic centre to attract

• This is community building. • Build it and they will come.

33. TRAPP+HOLBROOK IS ALSO ATTRACTING THE BABY BOOMER WANTING A COMMUNITY. WITH THE 55‐74 YEAR OLD CONSOLIDATING AND THE FIRST TIME BUYERS TAPPING INTO MOM AND DAD’S EQUITY, IT GOES SOMETHING LIKE THIS:

• The Kerrisdale home sells for $4.1 million to a buyer fromMainland China. This buyer from Mainland China is not speculating. They are buying for schools and will become a vital part of our economy.

• The homeowner repatriates his tax free sales proceeds outside of their predominantly Mainland China driven market.

• He takes his hard‐earned, tax‐free money to the Olympic Village on the water for $2.5 million, then spends $700,000 in Pheonix and the 2 kids, they each get $100,000. Then $500,000 to pay off his mortgage.


• Just like the ad says Freedom 55, except 75 is really the new 55.

34. VANCOUVER • Let me take you back a few years so that my numbers

have some relevance. • This room, the development industry, delivered almost

exactly 2700 completed condominiums in years 2005, 2007, and 2008 into downtown Vancouver.

• Jumping forward to today, 2012, those 2700 completionsof 2005, 07 and 08 have dropped to a mere 587 condominiums for 2012.

numbers.

• The 587 condos being delivered this year come from only4 developments and are already 87% sold including Hotel Georgia at $1400+ psf and 3 Harbour Green at $1700+ psf.

• As we all run as fast as we can towards affordability, other than Joo Kim’s Ritz Carlton site, with sales possibly Spring 2013,

• we may be in for a hyper‐luxury shortage in 2016.• I can just see the task force’s first meeting in St.Tropez.

35. FOR NEXT YEAR, 2013, DOWNTOWN WILL DELIVER ONLY 486 CONDOS IN 2 DEVELOPMENTS. ALREADY 70% SOLD, THESE RECORD LOW COMPLETIONS ARE THE EVIDENCE THAT IN 2008, THE BUILDER, BANKS, AND BUYERS ALL LOST CONFIDENCE.

• In downtown Vancouver, for 2014, there will be 1200completions that are already 89% sold.

• I should point out that Sandra Cawley, who I have worked with since 1990 of Burgess Cawley Sullivan & Associates does all of my inventory

• Sandra and I were only able to identify 7200 future condos in 34 possible developments in Downtown Vancouver.


• The 7200 condos that we have identified are for future developments represent 8‐12 years of permitting and development.

• 7200 over the next 10 years compared to

• 18,700 condos completed in the past 10 years. • Vancouver has no choice but to create density outside of

the downtown core.

36. RYAN BERLIN AND ANDY RAMLO OVER AT URBAN FUTURES HAVE CONVINCED ME THAT WE WILL HAVE 94,000 NEW RESIDENTS IN VANCOUVER, NOT GREATER VANCOUVER, BUT VANCOUVER. REQUIRING 53,000 NEW DOORS, CONDO, AND HOUSES OVER THE NEXT 12.5 YEARS.

• How are we going to achieve this as the barriers to entryfor development are increasing at every turn?

• All of the barriers to development and density will onlyeventually land in the first time buyers lap.

• In isolation, we can absorb obstacles to developments, however in accumulation, it is getting tough.

• There just has to be a better way than the recent Rize Alliance re‐zoning at Kingsway and Broadway.

37. LET’S LOOK AT VANCOUVER AS A WHOLE AND THEN THE REGION AS A WHOLE.

• Mike Magee is here today. Gregor’s Chief of Staff. • He knows the challenges first hand of moving density to

sensitive single‐family neighborhoods. • Very powerful and very vocal community groups are

causing moratoriums on development. • In the West End, • Grandview Woodland, • Marpole • and now the DTES. • All obstacles to affordability. • Add in my brilliant observation that we will not create

another single‐family lot in my lifetime


• tougher construction lending criteria. • Take into consideration that CMHC is looking to tougher

scrutiny on lending policies. • While I do not have the solution, Mike knows, it is too

complex for a quick answer. • No sound bite can fix this one. • Here’s the elephant in the room.

38. MORE DENSITY DOES EQUAL MORE AFFORDABILITY!

DOES MORE DENSITY EQUAL LESS PROFIT FOR THE DEVELOPER?

39. SURREY • Looks like Diane Watts has been lunching with David

Baxter. As I look at the region for affordability, I compared downtown’s potential 7200 condos over the next 8‐12 years to Surrey’s 18,650 for 2013 forward.

• 18,650 are not just identified but 18,650 are currentlyunder development application, site preparation or already in the pre‐registration stage.

• Surrey’s density is highly concentrated with 12,000 of the 18,650 in Surrey’s Central City.

• Start redesigning. • You just cannot get through this amount of inventory

without separating yourself from the pack. No market can absorb this amount of sameness.

40. BURNABY • Burnaby has seen breathtaking success ever since Colin

Bosa’s Sovereign opened on February 11. • Then to Concord’s Met, breaking $600 psf last month.

Burnaby will see 1461 completions this year with only 257 unsold and only 482 completions next year.

• For 2014 forward, there will be 9819 condos from 53 sites.


41. RICHMOND • With 1277 condominiums slated for completion in

Richmond this year, 70% are already sold. • Next year’s 2400 stock – already 60% sold and 7269 for

2014 and beyond with 50% of that housing stock held by 3 developers.

42. BRANDING

• As my talk comes towards the end, I want to confirm I am in the branding business.

point 15)

• Expo 86 elevated the brand, • 2010 Olympics elevated the brand, • the Stanley Cup riots didn’t hurt the brand. • This room elevates the brand.• Housewives of Vancouver dilutes the brand.• This is the greatest place on earth to be and for any real

estate related field, this is really the greatest place on earth to work from.

• Nobody likes the moniker, “World Class City”. I prefer that we are the “World’s Boardroom.”

43. A PLACE WHERE IDEAS ARE GENERATED, INTELLECT IS

MOVING HERE BUT THEY WILL ONLY STAY HERE IF THEY ARE CULTURALLY STIMULATED.

• Miro Cernetig has me speaking with Google and IBM at the MARS Institute in Toronto in July.

• Talking about city brands and the future of cities and how in this conscious society, the 60% relates to the 99%. (see

• I will also discuss my affordability model and how we canmove the fortunate, the conscious fortunate, into neighborhoods with the less fortunate and cause change without gentrification.

• We can, as long as there is housing stock for the less fortunate, zoned and legislated in place.

• It is very difficult to use the old model of moving the less fortunate in with the fortunate.


• I finally figured it out, Shaughnessy has far too much fortunate housing stock zoned and legislated in place to move the less fortunate in on any scale.

• When it comes to green and technology leadership, maybe we should learn from others on green issues and just copy them when it comes to energy savings. We can do the same with technology. Just learn from others.

44. BUT LET’S WRITE OUR OWN PAPER ON SOCIAL SUSTAINABILITY. DIVERSIFIED COMMUNITIES, MIX‐USED COMMUNITIES AND THE FUTURE OF THE BABY BOOMER. CONDOS DON’T KILL. PEOPLE KILL.

• So let’s stop putting out the fire with gasoline and let’s use the knowledge and passion of this room to mature this amazing real estate platform that we have created.

• Nothing wrong with being a skeptic but at least have thefacts.

• Peter Wall might be right – • owning real estate in Greater Vancouver is having a

winning lottery ticket. If he is right, let’s encourage it, don’t discourage it.

45. JIM GREEN AND A PRAYER BREAKFAST • In closing, since I was here last, I did 2 talks this past year

that stand out in my mind. • One was very uncomfortable and one was just difficult. • The difficult one was Jim Green’s Memorial. • I really liked Jim and the best way to describe Jim is, • Jim was always looked at by the left as too far right • and Jim will always be looked at the by the right as way

too far to the left. • What an amazing life we lost. He was a champion for our

city. • The uncomfortable one. • Tom Cooper, Pastor Tom Cooper, a dear friend of mine,


• I met sitting next to at a StreetoHome board meeting 5 years ago.

• Tom called me last fall and asked if I would talk at aChristian Prayer Breakfast.

• Of course, anything for Tom. • I think – • 30 minutes – • I’ll cover Woodwards, • Olympic Village, • started at 19, • transportation, • done. • Well, God works in mysterious ways. • Tom calls me a week before the talk date and says, • “You’re a hit! Sold out! 105 Christians at the Vancouver

Club…and the title of your talk is…’ • Are Christians Relevant in the City of Vancouver.’”• My inner voice says, “You have got to be fucking kidding

me.” • BUT ‐ • What I said to Tom was, “You have got to be fucking

kidding me.” • My talk was along the lines of – • I cannot tell you if you are relevant, but what I can tell

you is what will make you irrelevant. • You cannot ignore current culture • and • you should decide whether you wear your Christian faith

as a badge of honor or a crutch to lean on. • Just as you will decide today, • whether I wear my profession as a badge or a crutch. • Well, unbeknownst to me, sitting to my right was the

head of Evangelization for the Roman Catholic Church. • At the end of a one hour talk, the man on the other side

of the head of Evangelization for the Roman Catholic Church puts his hand up.


• “Bob, you have been polite, you have gone close to the issues, you read the papers, and you know the problems that the Catholic Church is facing, how would you advise us?”

• I actually had 2 answers – • First, you have to do like the RCMP, • when you mess up, • you fess up • and then you dress up.• Second, let’s be honest, • when you are asking Bob Rennie for religious advice, you

are in shit sir. • Thank you!

IS IT REALLY A BUBBLE? - Rennieforms.rennie.com/RMS/2012 UDI Speech.pdf · IS IT REALLY A BUBBLE?...

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