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Average Global Real Estate Prices

Blog by Stu Bell | October 3rd, 2011

My good friend emailed me this interesting image on some of the World's Real Estate Prices on a price/sq ft basis in US dollars. There is a massive spread in costs from Paris at $3300/sq ft to Houston at $54/sq ft! Vancouver falls surprisingly on the lower end of the big picture of global cities at $550/sq ft (http://vancouvercondoreport.ca/Fcst2011.aspx). The most expensive condos in Vancouver would range from $1000-$2500/ sq ft but the mean is approximiatly $550/sq ft. Cheap compared to Europe and Asia, but expensive compared to our neighbours to the South who are still recovering from the Mortgage crisis from overlending which led to financial collapse of lenders, stock markets, and real estate prices in 2008.


In a time of global uncertainty where investors are cashing out their investments and taking a look at markets from the sidelines, we do still see certain markets with increasing Real Estate Values, and the common thread is real estate growth is occuring in high end markets with property sought after on a global level. In Vancouver, Chinese investors have heavily swayed the detached market in 2011, but the condo market has softened in 2011 after a recovery in 2009 and 2010 after 2008 lows. With demand from China, Asia, The Middle East, South Africa, Australia, Europe, and domestically, our price/sq ft seems competitive and I would be curious to see how rental income compares to Vancouver where $2,500,000 houses rent for $6500/month and $500,000 condos rent for $2000/month. In China 64 million condos stand vacant (http://www.asianews.it/news-en/Crisis-in-China:-64-million-empty-apartments-19459.html), while detached home values are way beyond affordable for the average citizen, so investors buy detached houses here for $1,000,000-$8,000,000 because it seems "affordable" to them and to get cash out of China to a safe haven in Vancouver (http://interests.scmp.com/international-property/canada/vancouver-property-lures-chinese-money).

I still believe condos in Vancouver are a good investment as rent rates are high, vacancy is practically 0%, and Downtown Vancouver is land locked, surrounded by water and parks. The same argument of limited supply applies to the West Side and The Northshore, both limited by water and mountains. If demand continues to grow, economics 101 suggets prices will rise, but with consumer confidence down and with fears of a double dip recession if foreign direct investment stops our prices could decrease. Then again if China has a financial crisis or real estate bubble burst, hundreds of millions of Chinese Real Estate Investors may look to Vancouver where buyers from 2010 and early 2011 have already seen 20-35% appreciation, which bring fears over a bubble as many hope the governments restricts foreign direct investment (http://www.vancouverobserver.com/city/2011/05/20/leading-realtor-calls-vancouvers-housing-market-unhealthy).

No one has a crystal ball, but I'm a believer in the long run our real estate prices will continue to rise as some 2012 forcasts predict up to 6.8% (http://www.canadianrealestatemagazine.ca/news/item/799-vancouver-prices-to-keep-rising-central-1-credit-union), and rich landlords will get richer and sadly the average Vancouverite will be spending the largest chunk of their budget on housing and rent without the benfefits of home ownership: paying down principle on mortgage, tax free capital gains, building equity, low interest credit, adding 'sweat equity' into your property. pride of ownerhsip, and so forth. A rise in interest rates would also threaten a decrease in prices, but the trend is definitly going down and with a slow North American economy projections are for rates to stay low for the next few years as evidented by current offers of 2.99% fixed rate 4 year mortgages. If buying for yourself make sure you love it in case a slow market cycle approaches and you can't sell for the price you want, and if you are buying for an investment make sure it is an easy property to rent in the event you have to hold it longer than you'd like.

If you have any questions about Vancouver Real Estate or any of Vancouver's communities and condos please feel free to call Stu Bell at 604.562.0532.