After spending a couple short days in the Bay area earlier this month, I couldn’t help but ask myself if Vancouver has the potential to become the real estate phenom that is San Francisco? In case you aren’t aware, San Francisco has real estate prices that make even Manhattan look cheap! One bedroom condos rent for $3500 USD/ night…if you can find one! That’s more than double the average Vancouver one bedroom rent of around $2000 CDN per month.
In order to understand the similarities between the two markets, I first had to dig into why San Francisco rents are so damn high!
Why are San Francisco rents so high compared to Vancouver?
Simple…supply and demand, of course!
Demand has skyrocketed over the past twenty years due to the tech boom, adding hundreds of thousands of high paying jobs to the Bay area and Silicon Valley just down the road. The median household income in San Francisco is a whopping $112,000 USD per year! Compare that to around $50,000 for the rest of the USA. Head offices from tech companies like Apple, Cisco, Google, Salesforce, HP, EA, Netflix, AirBNB, Facebook, Lyft, Uber, Craigslist, Twitter, etc. drive incomes into the stratosphere. Not to mention all of the high paying financial services jobs that follow these tech companies around.
Supply has not kept up with demand. If you look at a map of San Francisco, you will see that most of the City looks like Kitsilano. Most neighbourhoods outside of the downtown core have a 4 level height restriction, and landowners obviously have a vested interest to keep it that way! They want their neighbourhood to retain it’s charm and character, and therefore are adamantly opposed to development. This “not in my back yard” sentiment has been prevalent since the 70’s, and doesn’t look to be changing anytime soon. They are very fearful of San Francisco becoming another Manhattan.
Surging demand + lack of supply = insane rents!
What are the similarities between Vancouver and San Francisco real estate
Well, both have severe land constraints. San Francisco is essentially a peninsula, surrounded by water on all sides, and Vancouver is hemmed in by water and mountains on all sides.
Homeless people- both have massive homeless populations, although San Francisco’s appears to be much worse. Just watch where you step, as you can easily end up in a pile of human feces when walking around Market Street!
Asian population. Both Vancouver and San Francisco have large Asian populations.
Affordable housing crisis. Both Cities have one of these, but for different reasons. Low vacancy rates are prevalent in both Cities.
What are the differences between Vancouver and San Francisco real estate?
Median incomes. This is where the similarities really end. San Francisco’s median income is $112,000 USD. Vancouver’s is only around $55,000 USD. Vancouver just simply doesn’t have the high paying jobs that the Bay Area does. Vancouver’s economy is based on real estate/ construction, and not Tech.
Development- Vancouver has this in spades. Just trying walking down the street in downtown Vancouver without spotting a crane. San Francisco, with the anti-development attitude, simply doesn’t have much development going on. In fact, in my time there, I didn’t see one single crane! If felt that this was extremely odd in a “boom town”.
Will Vancouver real estate ever become as expensive as San Francisco?
At first I thought that maybe it does have the potential, but after really digging into it, I simply don’t think that it will in the foreseeable future.
Vancouver certainly does have the demand. Not from high paying jobs like San Francisco, but from International migration. Canada is a very immigration friendly country, and many, many people from many, many countries want to live here. It is considered safe, clean, and politically stable. To top it off, prices here are viewed as relatively affordable when looked at from an International perspective (Compared to London, Hong Kong, New York, San Francisco, etc.)
What Vancouver DOESN’T have is the lack of supply that San Francisco does. Sure, there are geographic constraints to supply here, but the City Council is, as much as we like to gripe and bitch about them not being so, very pro-development. There is plenty of room to grow upwards still, and as more of the City gets rezoned from single-family homes to multi-family condo and strata developments, density will continue to increase.
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