Rennie’s housing numbers: what’s your take?

Vancouver's "King of Condo sales" is a helluva salesman, and a trigger for debate

Post has been updated with a clarification on the condo rental figures – see below.

Last week Bob Rennie, one of the people who took the idea of "selling the dream" to new heights in the Vancouver condo housing market, made his annual speech at an Urban Development Institute (UDI) luncheon. The topic of his speech was "What if it's not a bubble?" Rennie was positing the idea that the bottom is not about to fall out of Metro Vancouver's housing market, despite a decade of almost unrelenting price inflation.

What makes Rennie fun to write about is the inevitable reaction from those who don't see the world through his realtor's lens. In his UDI speech last week Bob asserted that one only needs a household income of just over $50,000 to get into the low end of the housing market as an owner. It sounds like a bold claim, but Rennie seems to have the numbers to back him up. Rennie admitted he needed good data if he was going to be credible, so he enlisted the help of the Urban Futures Institute.

A few details of Rennie's speech were splashed out onto media, such as in this Vancouver Sun coverage, and a short interview by CBC On the Coast host Stephen Quinn. Quinn's interview was interesting partly because of the undercurrent of frustration evident in the host's questions. He clearly was not there only to be persuaded by Rennie's numbers, but to challenge the realtor's analysis.

As Rennie says to Quinn, "if Bob's going to be optimistic, he's going to need a lot of data." Here are some of the details he presented.

  • The market indicates that "you have to build differently". Rennie interprets the growing market of aging baby boomers in the market means that developers must build many more larger one bedroom units.
    • Between 2009-2018 – 65-74 y.o. population is going to grow by 58%.
    • 55-64 y.o. grow by 36%
    • "Working/tax-paying population" (35-54 y.o.) only grows by 4.6%
  • According to Urban Futures' statistics, the amount of clear title home ownership by 55-74 year olds in Metro Vancouver is valued at $88 billion (113,000 homes, average $777K).
  • Where is first time buyer getting all this money? Out of 3,900 pre-sales "from Vancouver to Langley" in 2011…
    • Two per cent put down a 5% deposit
    • Two per cent put down a 10% deposit
  • Rennie's Answer: Aging baby boomers and their parents are "cashing out, and helping their kids. In part to maintain their lifestyle." They're risk averse and real estate is a safer investment.

Rennie looks at the average condo prices, and determines that home ownership is not out of reach of many buyers. Of 19,300 condos registered in land registry in 2011 (the average price: $427,000), the bottom eighty per cent is averaged at $315,000, which according to Rennie only requires $52,800 downpayment.

Pressed by Quinn on how many units were bought by real estate speculators, he had some more facts at his fingertips. Of 414 buyers at Marine Gateway, 170 responded to a survey. Of these 170 buyers, 62% were "investors" and 38% were home buyers. Quinn underlines that "two-thirds" of these buyers are buying in the hope the price will go up.

Rennie counters by pointing out that of this 62% who "invested" in a unit, half of them will move family into them or re-sell the units. The other half will simply hang onto them after putting 35-40% down. In this scenario the market has created 128 units of rental supply. And because the investor has put over a third down already, they are effectively creating subsidized housing supply. In a region that is twisting itself into pretzels on how to make affordable rental housing, Rennie seems to be saying it's staring us right in the face.

Rennie also states that while he doesn't sell houses, he believes that eighty per cent of home purchases over $2.5 million on Vancouver's west side are made by Chinese buyers.

The whole of Vancouver, says Rennie, should now be looked at as the "Shaughnessy/Kerrisdale" (expensive part) of Metro Vancouver, and the suburbs are what East Vancouver used to be – relatively affordable. This explains why Rennie repeats the mantra that rapid transit is what buyers are looking for near their home purchases. Reliance on automobiles is declining among young people, Rennie said on The Bill Good Show. "Today young people don't need their cars to get laid, they use their iPhones," he quipped.

UBC professor of land economics Tsur Sommerville commented on Rennie's findings. "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."

Is there a housing bubble in Vancouver? Bob Rennie says no. If he's not right then we can expect the market to be flooded with home sellers waiting for it to burst.

– post by Mike

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  • What’s missing, in my view, is an estimate of investor returns. I hope buyers of Mr. Rennie’s product understand the concept of “consumer surplus” and who the marginal buyer will be.

    From what I see yields based on recent condo sales are at a level at which larger-scale property investors will balk. Food for thought.

  • Steven Forth

    Fascinating stuff, and I am looking forward to the debate. My view is jaded by my experience in Tokyo. I was forunate to get part of my money out of the Tokyo market in 1989 and invest in Vancouver (good luck not superior understanding). I have watched Tokyo prices go down 50% and stay flat and the many people who had been told that real estate was a safe investment lose their retirement plans. Not that this will, or needs to happen in Vancouver. But overseas demand will not support prices for ever, the demographics are against this. We will need to transition to internal demand over the next decade and possibly much quicker. What happens then?

  • The Angry Taxpayer

    Quality of community, with so empty homes and condos? Who says they will be rented?

    Rennie works from a small set of numbers, from a project he’s marketed, with questions he’s devised. I think this falls under the header of “cheeky monkey!” Somewhere, a professional pollster like Barb Justason weeps…

    Analysis would be good. I would be so much more impressed with Bob if he pressed both the province and the city to keep track of real estate info—and demanded that his industry colleagues and their proxies to produce honest reports. And provide real addresses to buyers.

    Took a walk in my hood’ early last evening. So many homes with blinds drawn and junk mail piled up at door or stuck in door handles.

    Homes, so many homes, now just houses, sitting empty.

  • Brilliant

    Marine Gateway figures are flawed. Less than 50% response and you can bet those who didn’t respond probably couldn’t read the questions or wanted to keep a low profile and would definitely have skewed the investor oroportion higher.

    • I might be wrong, Brilliant, but I think it’s a pretty good sample for any kind of survey.

  • Glissando Remmy

    Thought of The Night

    “What’s in a name?”

    Think about it.
    If Rennie’s name was Trojan, and if he was selling Rubber Hoses instead of, oh well, Condos, almost same thing, as one way or another, someone gets shafted in the end, we could have called him… The Condom King!
    See what I mean?

    We live in Vancouver and this keeps us busy.

  • tf

    Using Rennie’s numbers – “…62% were “investors” and 38% were home buyers…. of this 62% who “invested” in a unit, half of them will move family into them or re-sell the units. The other half will simply hang onto them after putting 35-40% down.”

    So 62% of a community is transient – holding property to make a buck. Only 38% are committed to building a community, meeting their neighbours, planting gardens.
    That’s how the quality of our lives degenerates.

  • Jason Gordon

    tf – aren’t you wrong? A large percentage of our community rents. Are you really saying these people don’t meet their neighbours, plant gardens or build community?. Might it not just be individual investors more directly owning rental property rather than through pools/pension funds?

    Somewhat separately – I didn’t think this statistic was the strongest within Bob’s presentation for the reason cited by YVRHousing.

    • Everyman

      Jason, I’ve lived in rentals, owned condos and owned houses. By far the least sense of community was in rental buildings. People didn’t recognize or acknowledge their neighbours and a constant turnover made it hard to do so. There are exceptions to every rule, but generally the less you have invested in a property/community the less you care.

      I’m a bit surprised Rennie says he “doesn’t do houses”. Two freshly scrubbed, pleasant realtors from Rennie & Associates knocked on my door recently asking if I or anyone I knew in the ‘hood was interested in selling. Perhaps Bob knows about a forthcoming upzoning that I don’t?

      • The Angry Taxpayer

        Indeed. There is a “Sold” sticker on a Rennie Marking sign for a single family res just up the street from me.

  • Max

    So for a $315,000 box, you need to put down $52+K

    How many working young people, middle aged people or seniors have that kind of money available to them. Unless you can take out a loan of sorts or do have the benefit of family members helping you, you have little hope of being a home owner.

    $52 K is far from a drop in the bucket – especially if that $315,000 gets you 320 – 400 sq feet.

    What a sad reality to face.

  • sorry, but I can’t get past “Today young people don’t need their cars to get laid, they use their iPhones,”

    Nothing I have read in the last year has given me as much hope for the future as that.

    • Everyman

      Pat, far be it from me to question something that facilitates anonymous sexual hook-ups, but a recent study might throw some cold water on that theory:

      In a national survey, about 36 percent of respondents admitted a car could act as an aphrodisiac; the number was even higher for women (40 percent) and young drivers under 35 (50 percent).

      The CarCourting Report, conducted by Angus-Reid, surveyed more than 1,500 adults across Canada. It confirmed that for Canadians, the car buying process is typically more emotional than rational.

      • The Angry Taxpayer

        I would agree.

        Think it must be awkward to pitch woo in those bus seats… 😉

    • The Angry Taxpayer

      I agree. Jaw-droppingly crude and cynical comment. Bill Good was caught off guard, too. These are your civic leaders, folks! Ranks well up there with “effing hacks’ remark. Arrogant.

      To me, Rennie always posesses the studied nonchalance of someone who is trying to fluff the conversation.

  • ned

    Rennie is a douche who got in at the right time. He got lucky. That’s all. Patron of the Arts… don’t make me laugh!

  • Steven Forth

    As a city and community we need to provide rental units and there is nothing wrong with renting or people who rent. They should not be discriminated against or have to put up with gratuitous insults by people like Everyman (who represents only himself). Not sure that flipping condos is the best way to support the rental market though.

    None of my three kids own cars, all in their twenties, all with good jobs.

    • Everyman

      Save your faux outrage Steven for your friends at Endswell.

  • Working Mom

    Bob Rennie – Mr. King of Condo has done such a dis-service to the people of Vancouver. This week I was visiting various housing developments to see if they have homes that are more than two bedrooms.

    What a FREAKING joke! All I got was “No we only do one and two bedroom condos” or “Yes we have two row town homes that are three bedrooms, 1,400 sq ft for $1.4 million!!!!!” Yeh right… it is pretty obvious that Mr. King of “@$$!!!” Condo has no care or love for families or children. So while I got sucked into buying a condo and now have a child – I have to deal daily with residents to constantly smoke outside my child’s extra small bedroom and deal with complaints if he so much as make the slightest noise when he is playing – AND I can’t afford a house in Vancouver!

    It is pretty disgusting that Bob Rennie and his like are tearing down family homes to build condo’s that are not suitable for growing families.

    Shame on Mr. Rennie and the City for allowing this crap to happen.

    • Heather Tailors

      Right on Working mom!
      Here’s another working mom who would like to tell Rennie to take his comments, roll them, and shove them up his…