The Man Who Predicted Vancouver Real Estate with David Ley | VREP #95

What do geography and real estate have in common? Find out by listening to this week’s episode, featuring UBC Geography professor and longtime student of Vancouver real estate, David Ley.

David has done extensive research on gentrification and its effects on real estate in Vancouver and he makes some pointed observations and surprising predictions about our market. Surely an episode you won’t want to miss!

Check out David’s highly-acclaimed book, “The New Middle Class and the Remaking of the Central City

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Episode Summary

Can you tell us about yourself?

I was born in the UK. I did my undergrad there and graduate degrees in the US (Pennsylvania). I came to Vancouver in 1972 and have been in geography ever since.

We’ve talked to many people like urban planners, economists, historians. As a geographer, what got you interested in Vancouver real estate as a topic of study?

My field is urban geography. When I moved here, I was looking for urban topics to research and latched onto the topic of gentrification (the movement of wealthier people into neighborhoods that historically have housed poorer people). This was going gangbusters in the early ‘70s in Vancouver with the arrival of the condo a few years earlier. I met an elderly woman who was being evicted from her home in the Fairview area. I looked into that a little more and saw that hers was not an isolated experience. I became interested in the gentrification question in older, inner-city neighborhoods and worked on that for about 20 years. I wrote a book in mid-90s that pulled it all together. By then, I was looking at inner-city housing markets across the country from Halifax to Vancouver. As is often the case with research, it’s happenstance that introduces you to a topic and the momentum carries you on.

Gentrification is a rich field of study in Vancouver, for sure. You mentioned that you worked across the country, from Halifax to Vancouver; do you find Vancouver fits better into a Canadian context? Is there another pacific rim context? Great question. Are you talking about present day or the period when I was doing gentrification research? Maybe when you were doing that research – often people say Expo ’86 is “when the world turned”.

That’s an accurate assessment. My basic argument during that period was up to the late ‘80s, we were looking at a made-in-Canada set of issues. A new demographic cohort (the baby boom) exercising pressure on the inner city – they wanted a more urbane lifestyle; there were a lot of them. In the 1960s they were students, in the 1970s they became young professionals. The development companies that served them were overwhelmingly Canadian – from Toronto, Winnipeg, Vancouver. And, moreover, this rapid redevelopment was very much an inner-city phenomenon. There was very little going on in the single-family neighbourhoods during that period. I talk about this as a made-in-Canada set of issues, which is quite different from the period since Expo.

Can you speak a little bit about since Expo in Vancouver and what changed?

You’ve got to remember where we were in BC in the early 1980s – our resource-based economy was in trouble and government was looking desperately at how to jumpstart and move the economy from the industrial to the post-industrial era. The bright light globally then was what was happening in Asia-Pacific: the “four tigers” and Japan in the 1970s and 1980s exercising enormous growth potential and actual growth. As politicians, in BC especially, looked for solutions, inevitably their eyes were drawn westward to that region. There was a desire to get coupled into this area of growth and economic development. That’s what Expo amounted to: Expo was showcasing this region for investors and possibly migrants, though I don’t think that was high on the provincial-level agenda at that time. Certainly, investment was. Expo ‘86 brought people here, just like the Olympics a few years ago advertised the city internationally.

Something else happened at the same time which was very important: the creation of the investor stream in the business immigration program. This became available the same year, in 1986. It opened up a flood of immigration from East Asia, particularly wealthy people, taking advantage of the investor option. I see 1986 as a real threshold as we move from a made-in-Canada argument around real estate to a much more complex situation, where global factors are certainly prominent.

Fascinating. You touched on a lot of interesting topics. We’ve heard of Vancouver being one of the superstar cities, along with Sydney, London, Hong Kong, New York. Is this a global real estate trend that you’re describing? It seems like there’s some factors here that are specific to Canadian policy and provincial dynamics as well.

You’re right and that’s where we get into the question of the movement of the national to the global. Geographers always emphasize there are different scales in explanation. There’s the global scale, the national scale, the provincial scale, the urban scale. There are different factors that operate at each of those scales, and I think increasingly we see them combining in some complex ways. While we can indeed recognize some global processes as you suggested, they intersect with more particular issues in the province, and the province as part of the nation. So, any explanation of the current real estate market needs to operate at those different spatial scales.

About Vancouver being one of a set of star cities, it clearly is. I think you’ve put your finger on something important: what’s happening here is not unique to here. There are other cities that I call gateway cities because they’re gateways between national and global flows of people and capital. Los Angeles, San Francisco, New York, London, Singapore, Sydney. They’re all experiencing similar pressures in their housing markets. Some are closer to us and some are more distant. I think the Sydney market bears quite a few similarities with the Vancouver market. But even in London, you’ll see some very similar processes at work there, though of course reflected through the particularities of government policy in the UK. So, we are not unique but as we think of not just global processes, but provincial and national processes, we are nonetheless different from other gateway cities.

In thinking about gateway cities and how stark the change has been in the last 30 years, it sounds like, with the emergence of these cities, where do you see the future of Vancouver? This doesn’t seem like something that’s going to change anytime soon.

It depends a lot on how the global meets the local. Globalization and gateway cities go hand-in-hand. I think an important question is: to what extent are there checks and balances on global processes in different jurisdictions? One might look, for example, at Singapore, a city-state that we think of as being very, very friendly to the market, and indeed it is. But it nonetheless has a very highly regulated housing market and in the last five years has introduced a large number of taxes and other policies to check the kind of price inflation that we’ve seen here. And, I might add, with some success: they’ve had 15 consecutive quarters of a steady state of housing prices. So, looking to the future, it depends what policy decisions are made. Global processes are not going to go away as you implied, but how we engage them – in other words, how the national and provincial scales interact with the global scale – is really up for grabs. It’s up for Canadians to decide.

Can you speak a little bit more about the types of policies implemented in Singapore? Have you looked into that?

A little bit, yes, because I’ve been interested in my research in precisely the way you’re questioning me now – looking at Vancouver in a bigger context so we can learn from what’s happening in other places.

There is a tax similar to our 15% here, but there is also a sellers’ tax in Singapore, which is an anti-speculation tax. If you buy and sell a property within a short period of time, you are taxed on a sliding scale. I think the original numbers were if you sold within a year, 12%, if you sold in less than 2 years, 10%, and so on, I think up to four years. I think in the fifth year, there was no tax. So, you can see the effect there is to try to check speculative activity. There’s been a fair bit of talk by the mayor of Vancouver about the need for a speculation tax. I think the Singapore case is an interesting one to follow up on. The other thing in Singapore is there’s a differentiation in tax levels for different groups of people. If you are a non-Singaporean, if you are a permanent resident, if you are a native-born Singaporean, then the taxes impact you in different ways. Similarly, if the sale involves a second house as opposed to your primary residence, the taxation differs again.

So, they’ve introduced a number of levers of this kind. Singapore, which has had serious booms and busts in the past, recognizes the disruptive effects of that to local economies and society and I think they’ve controlled it quite effectively.

Interesting. You live in Vancouver and moved here in 1972, and have been interested in urban geography since then – would you have ever, say in Expo or the early 1990s, predicted where we are now? Has this been a big surprise to you?

The surprise is the scale of the change. You’ve been able to see the direction of the change since about 1991 when Vancouver prices exceeded Toronto prices, and we’ve been on an upward trajectory ever since then. I think the persistence of that trend, and indeed its rapidity in the last few years – I don’t think anyone could have expected the extraordinary increases from 2015-2016. In hindsight, they become very understandable but they were not very predictable.

Can you speak more to what you mean by “in hindsight they become understandable”?

There is very strong evidence that the huge exodus of capital from China from 2014-2016 impacted a number of housing markets in gateway cities. Their foreign reserves fell by a trillion dollars in a very short period of time. Though not all of that of course was going into real estate, there was a tremendous desire of people to diversify their portfolios, globally. For the Chinese, the number one investment preference has always been real estate. If you look at a middle-class or wealthy Chinese household, their portfolio has a much higher weighting to real estate than you would find in a typical Canadian portfolio. So, you have a huge amount of money leaving China with an orientation towards real estate investment, and it comes into a select group of cities. The most favoured region, globally, has been the west coast of North America. LA, San Francisco, and Vancouver were the three most favoured cities for many years; Vancouver has slipped down a bit in the last year and a half. First, the prices seemed so high here, and second, the 15% tax, as it was intended to, has cooled down demand.

What does geography bring to the study of real estate? What is specific to your discipline when looking at real estate?

When I encounter people from other disciplines in this research, geography brings a desire to be grounded and responsible to evidence. It is very much evidence-driven that we find in particular places. I’d contrast that to other positions that seem abstract, theoretical, and frankly not awfully realistic in their assumptions. Urban geography brings a desire to go to the evidence, to be grounded, to look at real estate markets not in isolation but in their contexts, which include the different scales: the local, regional, national, and global. You bring in all of these scales into the story you tell.

 
 

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