How to invest in Vancouver housing without buying a whole house?

October 4, 2012 8:39 PM

I would like exposure to the Vancouver (BC) housing market in my investments, without buying an individual unit of housing. Can this be done?

So, I'm a young professional in Vancouver and I quite like it here. I'm probably going to be staying here for the long haul, and to that end I'd like some exposure to the local property market (preferably middle to high quality urban multifamily housing) in my savings/investments. A bit of insurance against the possibility of housing prices continuing to skyrocket would be nice.

The obvious solution is to save up for a condo and then live in it, but that scares the hell out of me - I don't want a huge chunk of my savings to be tied up in one giant, illiquid, and risky (What if the strata is awful? Or the building becomes infested by bedbugs? Or...) investment. Ideally I'd be able to split my savings across multiple units for diversification.

I don't have any friends who would be interested in splitting ownership of a property, and besides the hassle of renting a unit out is a big turnoff.

A residential REIT with a majority of its properties in urban BC would be ideal, but I haven't found any.

Given all that, can you think of anything that might work for me? Thank you!

posted by ripley_ to work & money (5 answers total)

I would be surprised if you can find a REIT with such narrow geographical focus because it seems a fundamental attribute of REITS is diversification, by geography and/or industry/market segment (residential houses and condos and apartments, industrial warehouses, offices, shopping centers/malls, hotels etc). For example, Allied Properties REIT in Canada focuses on office properties but in multiple geographical markets in order to reduce the risk of only being in office properties (frankly that's still too risky for my taste - I prefer something like the highly diversified Vanguard REIT Index Fund). Here's a list of some REITs in Canada.
posted by Dansaman at 8:59 AM on October 5, 2012

All signs indicate that Vancouver's property market is stalling and probably crashing.

Sales are way down, there is a massive oversupply issue, making August the weakest month in 15 years. Bear in mind that Vancouver has had massive housing bubbles in the past. The offshore (foreign) investors buying in the West side have dried up, the feds are moving to cool things down (too slowly) so money is tighter and all the easy marks have all have all been separated from their money.

The talk will soon be of soft landings, houses underwater and zombie banks. Vancouver might not unfold like the housing disasters in California or Japan because like Sydney Australia the leadership/political system could be much more active in mitigating a housing crisis.

Just look at the second chart in this video which compares San Fran to Vancouver, and that's from the guy behind the Case Shillar home price index. He isn't "investing in housing in Vancouver" - so unless you know something he doesn't I would be very wary of your plan.
posted by zenon at 9:38 AM on October 5, 2012 [1 favorite]

Just to clarify my answer above, investing in one real estate segment (residential) in one geographic market (and remember Vancouver isn't a huge city, so internal diversification is more limited compared to a giant metropolis like New York or Los Angeles) is considered fairly risky, and most people who buy REITs are doing so to reduce risk, therefore it seems unlikely that any company would create such a REIT - there presumably wouldn't be much demand for it.
posted by Dansaman at 10:00 AM on October 5, 2012

It is about 3 months after the worst possible time to buy real estate in Vancouver, and most of the rest of BC (and most of Canada, for that matter). The long-overdue crash, beginning now in part because of recent changes to regulations that deal with mortgages, is just getting underway, and Vancouver will be lucky to get away with less than a 40% drop in prices. I strongly advise that you wait, and do some very careful research, or the chance is high indeed that you will regret it enormously.
posted by stavrosthewonderchicken at 12:51 AM on October 8, 2012

Thanks for the helpful comments, Dansaman.
posted by ripley_ at 10:12 AM on October 8, 2012