BuzzBuzzHome Corp.

August 24, 2010

It’s no secret that Vancouver has the highest housing prices in the country. They show no signs of dropping or hitting a plateau any time soon.

The point experts are still debating is what exactly is driving these prices up? Is this the dreaded real estate bubble emerging in Van City?

Not this time says Tsur Somerville of the UBC Centre for Urban Economics and Real Estate. He places the blame for the high prices squarely on the people, all two million residents of Vancouver. There is not enough new real estate development to accomodate Vancouver’s steady population growth (1.3 to 1.5 per cent/year).

So what’s the problem? Why not develop some land in the area surrounding the city and its suburbs.

To put it simply, there’s just not enough land in the city for new developments because of “geographic restrictions.”

According to the Vancouver Sun:

“Depending on where you draw the circle,” Sommerville says, “70 per cent of the land isn’t developable. It’s mountains or water or the United States… The higher the population of a city, the higher the house prices. If we lost 70 per cent of the land, our metropolitan area of 2 million people will have the same housing prices as a seven-million metropolitan area. Because people have to commute the same distance. “

Huge demand for housing + not enough developable land = no bubble in Vancouver, just the good ol’ fashioned supply and demand economic model at work.

Looks like the city could either move mountains, fill in the ocean (Dubai style) or annex some land from the U.S. I wonder which option they’ll choose.

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