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Infographic: Vancouver Real Estate Mania

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Vancouver Real Estate Mania

Vancouver Real Estate Mania

On January 29th, 2016, Vancouver went crazy.

The story of a humble 86-year-old home in Vancouver’s Point Grey neighbourhood was widely circulated by national media outlets and became a lightning rod for local frustration with skyrocketing property values.

The “knockdown”, with its rotting walls and $2.4 million asking price, perfectly underscored how crazy the region’s overheated housing market had gotten.

A month later, the house was sold for $80,000 above its asking price, rekindling public outrage.

How did Vancouver reach this point?

This infographic’s purpose is to connect the dots between Vancouver’s history of speculation, demographic waves, public policy, and external pressures that have all had a hand in shaping today’s hot real estate market in the city.

Let’s start at the very beginning…

Chapter One: Birth of a Boomtown

In a surprise move in the late 19th century, the Canadian Pacific Railway announced that the tiny town of Granville would become the terminus of the future Trans-Canada Railway. Granville, with just 400 people, is now the nucleus of Vancouver – and the well-connected men who had conveniently purchased property in the area made a fortune as prices rocketed up.

By the close of 1888, the local newspaper was packed with property speculation ads, and Vancouver real estate companies outnumbered restaurants by a margin of over 250%.

These bets on real estate weren’t in vain. Vancouver actually outpaced all major West Coast cities in growth between 1900 and 1910. While Seattle and San Francisco grew at 194% and 22% respectively, Vancouver’s population soared by a clip of 271% over the same period.

Chapter Two: Expo 86

Hosting the 1986 World Exposition was a pivotal moment in Vancouver’s history. The legacy of Expo is far-reaching, including: rapid transit, new neighbourhoods, a connected seawall, increased investment, and a new stadium (BC Place).

The 70 hectare (173 acre) Expo site was carved out of industrial land and the former Canadian Pacific Railway yard. Once the fair ended, the provincial government looked to sell off the entire block of land for redevelopment.

In 1988, after recognizing the potential of the site, Hong Kong businessman Li Ka-Shing formed Concord Pacific and purchased the site for $320 million.

Chapter Three: Hong Kong Loves Vancouver Real Estate

In the 1990s, there was much trepidation in Hong Kong over the looming handover of the colony to China. Many people were looking to move themselves and their money to a more stable market. Concord Pacific, and Li Ka-Shing’s name, sparked enormous interest in the Vancouver real estate market.

Other Hong Kong businessmen also got in the development game in Vancouver. Cheng Yu-tung’s company built International Village and Sun Hung Kai Properties is now well-known for being the driving force behind Coal Harbour.

Immigration from Hong Kong, coupled with an influx of Canadians from other provinces, led to drastic home price increases during the early ’90s. The fabric of the city was changing, and existing residents were vocal about it. The “Monster House” debate raged in the local media throughout the decade.

Chapter Four: The Welcome Mat

During the same year as Expo 86, the Canadian Federal government and the Quebec government wanted to use immigration to bolster their economies. They created programs such as the Immigrant Investor Program (IIP) and the Quebec Immigrant Investor Program (QIIP) to attract wealthy foreigners.

Between the two programs, there were over 110,000 approvals to come to Canada between 2002 and 2014. (Note: From 2007 to 2012, the United States only accepted 19,433 wealthy immigrants through its EB-5 program)

The Quebec Loophole
A recent study tracked the addresses of 5,120 Quebec immigrant investors who arrived from 2000 to 2008. An astonishing 94% of the newly-arrived investors eventually had an address in British Columbia and most were living in the Vancouver area.

The Quebec government now has a quota of 1,330 applications per year from China. Assuming those applicants migrate to Vancouver at similar rates as in previous years, the flow of multi-millionaire immigrants will continue for some time.

Chapter Five: Vancouver’s Housing Feeding Frenzy

Fast forward to 2016. Vancouver is seeing record-breaking prices, and the momentum for single-family homes is showing no signs of slowing down.

In April 2016, the average detached home in Greater Vancouver sold for $1.82 million, which is a 30% increase year over year. That was not a typo – the price of a detached home in Vancouver is now nearly twice that of Greater Toronto ($968k), and multiples higher than Calgary ($540k) or Montreal ($343k).

Record high prices aren’t dampening sales though. In 2016, sales have been brisk with nearly 17,000 houses sold in the first four months of the year. Many of these have sold for significant sums above their asking prices.

Chapter Six: Business is Booming

In response to skyrocketing detached home prices, Vancouverites are increasingly living in condos. Residential development construction is practically propping up British Columbia’s economy.

BC had the highest GDP growth in the country in 2015, and it’s expected to put up strong numbers in 2016 as well. Between April 2015 and April 2016, BC accounted for 110,000 of Canada’s 144,000 net new jobs with construction leading the way.

Business is so good that the value of building permits broke a new city record in 2015 with over $3 billion. There were at least 10 major construction projects – each valued at more than $50 million – approved over the course of the year.

And Vancouver realtors? They’re doing well.

With so much money to be made selling property and condos, the Vancouver real estate industry is thriving. The Real Estate Board of Greater Vancouver says licensed membership is at an all-time high.

Chapter Seven: Locals are Getting Fed Up

The dream of owning a home is getting further out of reach even for well-off Vancouverites. Surging home prices and stricter down-payment rules mean that it can take over two decades to save up a down payment for a home.

Vancouverites seeking relief from the super-heated single family home prices won’t find it elsewhere in the market. The median condo price in Vancouver is up over 40% since 2014.

Renters are not immune to price increases either, as price-to-rent ratios are way out of whack in Metro Vancouver. According to real estate website Trulia, in nearby Seattle it takes 14.5 years of rent to equal the price of a house. In Vancouver, it takes 36.9 years.

Lastly, many residents worry that this red-hot demand is obliterating Vancouver’s character. Land values are so high that viable housing is often demolished to make way for new buildings. As a result, thousands of homes are torn down each year.

Chapter Eight: Is This Growth Sustainable?

The experts are far from reaching a consensus on whether Vancouver’s market can continue on as it is now.

On one hand, experts such as Stéfane Marion (Chief Economist, National Bank) say that growth in the working age population in Vancouver is 70% higher than the national average, and it can help sustain home price inflation. Meanwhile, Thomas Davidoff, an Associate Professor of Economics at UBC, points out that if Vancouver is a magnet for China, this housing run could continue for quite a while.

Davidoff may be onto something – there were 9,000 Chinese millionaires that emigrated from Mainland China in 2015, and there are 654,000 millionaires still in China today. The latter number is expected to double by 2025. It’s also noteworthy that in a recent poll by Barclays that 47% of Chinese millionaires expressed a desire to move abroad in the “next five years”.

The contrasting view, of course, is that Vancouver is in a bubble that is overdue for popping.

Marc Cohodes, a famous Wall Street short-seller we recently profiled in another recent chart we did on Canadian housing, argues that Vancouver is a casino in which residents feel pressured to play, otherwise they miss out. Meanwhile, David Madani, the Senior Canadian Economist at Capital Economics, says that severe overvaluation, high household debt, and overbuilding is going to make the housing correction end in a way that is deeper and more prolonged than initially feared.

The Bank of Canada has sounded the alarm on household debt recently, and “unsustainable debt” per household has soared in the country. Between 2008 and 2014, the amount of Canadian households with debt-to-income ratios greater than 250% jumped from 28% to 40% of all households.

Which province is home to the highest rate of households with “unsustainable debt”? BC, of course.

Vancouver’s parabolic prices may eventually cool down, but in the near-term, Vancouver real estate mania is here to stay.

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CBD Oil vs. Hemp Oil: What’s the Difference?

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CBD Oil vs. Hemp Oil: What’s the Difference?

For many consumers, cannabis plays a significant role in the treatment of medical conditions and managing general well-being. As a result, certain products have seen a rapid increase in popularity in recent years.

But while awareness of these products is at an all-time high, false or misleading information continues to cause confusion, and creates an unnecessary barrier for consumers who want to experiment with, or try different products.

For example, 69% of cannabidiol (CBD) products are reported to have inaccurate labeling, so it’s no surprise that some consumers are uncertain about the suitability of these products and are hesitant to invest.

Today’s graphic from Elements of Green dives into the differences between popular cannabis products, CBD oil and hemp seed oil—more commonly known as hemp oil— and the common misconceptions that are inhibiting consumers from entering the space en masse.

Same Plant, Difference Characteristics

Typically, both CBD oil and hemp oil originate from the hemp plant, a non-psychoactive cannabis plant. Therefore, it typically does not result in any intoxicating effects. However, many consumers mistakenly believe that CBD or hemp products will get them high, when in fact it is the marijuana plant—hemp’s psychoactive cousin—that can induce mind-altering effects.

Even though both oils are extracted from the same plant, they each have very different characteristics and uses that consumers should be aware of.

CBD Oil

CBD oil is extracted from the flowers, leaves, stems, and stalks of hemp plants, and contains high levels of the naturally occurring CBD compound. Various CBD oil formats include tinctures, vape oil, and capsules, which are commonly used for their proven therapeutic benefits, such as:

  • Pain management
  • Relaxation
  • Stress relief
  • Treatment of medical conditions such as epilepsy, schizophrenia, multiple sclerosis, and arthritis
  • Reduction in anxiety
  • Sleep aid

When it comes to product labeling, consumers should be aware that different types of CBD oils exist, depending on the chemical compounds—known as cannabinoids—they contain.

  • CBD Isolate: Pure CBD, with no other cannabinoids such as THC
  • Full-spectrum CBD oil: Contains CBD among other cannabinoids, with no THC
  • Broad-spectrum CBD oil: Contains CBD among other cannabinoids including low levels of THC

These oils are used in a wide variety of consumer products such as beverages, beauty products, and even pet food.

Hemp Oil

Hemp oil, on the other hand, is extracted from hemp seeds and contains no cannabinoids such as CBD and THC. It is used more like a traditional cooking oil, but can also be found in topical creams and lotions.

More recently, hemp oil is being hailed for its use in industrial products such as concrete, bio-plastics and fuel. While it has huge potential for use in both consumer and industrial products, its benefits differ slightly to CBD oil:

  • Source of plant-based protein and rich in fatty acids and antioxidants
  • Reduces inflammation
  • Reduces severity of skin conditions such as acne, eczema, or psoriasis
  • Anti-bacterial properties
  • Could reduce PMS or menopause symptoms

Consumers should ensure that hemp oil is listed as the active ingredient on the product’s packaging, but it may also be listed as cannabis sativa seed oil.

Busting the Myths

While there is strong scientific evidence to support the efficacy of CBD oil and hemp oil, companies need to commit to both appropriate and safe labeling regarding dosage levels and ingredients.

Following that, previously held stigmas and misconceptions should slowly disintegrate as these products become more widely available and consumers increase their knowledge and understanding of their benefits.

Considering that the popularity of cannabis consumer products has only exploded over the last decade, initial confusion surrounding them is to be expected, and the true potential of these products is yet to be realised.

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Technology

Visualizing the Size of Amazon, the World’s Most Valuable Retailer

Amazon’s valuation has grown by 2,830% over the last decade, and the tech giant is now worth more than the other 9 largest U.S. retailers, combined.

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Visualizing the Size of the World’s Most Valuable Retailer

As brick-and-mortar chains teeter in the face of the pandemic, Amazon continues to gain ground.

The retail juggernaut is valued at no less than $1.4 trillion—roughly four times what it was in late 2016 when its market cap hovered around $350 billion. Last year, the Jeff Bezos-led company shipped 2 billion packages around the world.

Today’s infographic shows how Amazon’s market cap alone is bigger than the nine biggest U.S. retailers put together, highlighting the palpable presence of the once modest online bookstore.

The New Normal

COVID-19’s sudden shift has rendered many retail outfits obsolete.

Neiman Marcus, JCPenney, and J.Crew have all filed for bankruptcy as consumer spending has migrated online. This, coupled with heavy debt loads across many retail chains, is only compounding the demise of brick-and-mortar. In fact, one estimate projects that at least 25,000 U.S. stores will fold over the next year.

Still, as safety and supply chain challenges mount—with COVID-19 related costs in the billions—Amazon remains at the top. It surpasses its next closest competitor, Walmart, by $1 trillion in market valuation.

How does Amazon compare to the largest retailers in the U.S.?

10 Largest Public US Retailers*Market Value July 1, 2020Market Value July 1, 2010 Normalized % Change 2010-2020Retail Revenue
Walmart$339B$179B90%$514B
Costco$134B$24B458%$142B
Amazon$1,400B$50B2,830%$140B
The Kroger Co.$26B$13B107%$118Be
Walgreens Boots Alliance$36B$26B38%$111B
The Home Depot$267B$47B466%$108B
CVS$84B$40B112%$84B
Target$60B$37B64%$74B
Lowe's$102B$29B251%$71B
Best Buy$23B$14B59%$43B
Combined value of retailers (without Amazon)$1,071B

Source: Deloitte, YCharts
*Largest public US retailers based on their retail revenue as of fiscal years ending through June 30, 2019, e=estimated

With nearly a 39% share of U.S. e-commerce retail sales, Amazon’s market cap has grown 2,830% over the last decade. Its business model, which aggressively pursues market dominance instead of focusing on short-term profits, is one factor behinds the rise.

By the same token, one recent estimate by The Economist pegged Amazon’s retail operating margins at -1% last year. Another analyst has suggested that the company purposefully sells retail goods at a loss.

How Amazon makes up for this operating shortfall is through its cash-generating cloud service, Amazon Web Services (AWS), and through a collection of diversified enterprise-focused services. AWS, with estimated operating margins of 26%, brought in $9.2 billion in profits in 2019—more than half of Amazon’s total.

Amazon’s Basket of Eggs

Unlike many of its retail competitors, Amazon has rapidly diversified its acquisitions since it originated in 1994.

Take the $1.2 billion acquisition of Zoox. Amazon plans to operate self-driving taxi fleets, all of which are designed without steering wheels. It is the company’s third largest since the $13.7 billion acquisition of organic grocer Whole Foods, followed by Zappos.

Accounting for the lion’s share of Amazon-owned physical stores, Whole Foods has 508 stores across the U.S., UK, and Canada. While Amazon doesn’t outline revenues across its physical retail segments—which include Amazon Books stores, Amazon Go stores, and others—physical store sales tipped over $17 billion in 2019.

Meanwhile, Amazon also owns gaming streaming platform Twitch, which it acquired for $970 million in 2017. Currently, Twitch makes up 73% of the streaming market and brought in an estimated $300 million in ad revenues in 2019.

Carrying On

Despite the flood of online orders due to quarantines and social distancing requirements, Amazon’s bottom line has suffered. In the second quarter of 2020 alone, it is expected to rack up $4 billion in pandemic-related costs.

Yet, at the same time, its customer-obsessed business model appears to thrive under current market conditions. As of July 1, its stock price has spiked over 51% year-to-date. On an annualized basis, that’s roughly 100% in returns.

As margins get squeezed and expenses grow, is Amazon’s growth sustainable in the long-term? Or, are the company’s strategic acquisitions and revenue streams providing the catalysts (and cash) for only more short-term success?

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