Boom/Bust Town

by Zbigniew

“Unlike anywhere else I have ever known –even Alberta in the 1970s- this province has become a passive state run by and for real-estate developers.”

Trevor Boddy, “Vision Deficit”, Vancouver Review (Winter 2009/10)

From conception, property development was tightly woven into Vancouver’s DNA, engendering a depressingly regular pattern of rampant speculation, des/construction, boom and bust. The Terminal City as land of milk, honey and vinegar.

With the assistance Donald Gutstein’s Vancouver Ltd. and The Dependent Magazine, and others, let us part the mists of time and visit a place of constant change yet eerily similar to our own.

1886 to 1893: Birth by Fire

The selection of Granville (scratch: Vancouver) as the CPR terminus instigates a property boom. One-acre plots that sold for $1.00 in the 1870s fetch $1,100 by 1893.

Rudyard Kipling got in on the action: ” … 400 well-developed pines, a few thousand tons of granite scattered in blocks, and a sprinkling of earth. That’s a town lot in Vancouver.  You order your agent to hold a town lot until the property rises, then you sell out and buy more land further out of town …. I do not see how this helps the growth of the town … but it is the essence of speculation.”

This inaugural boom literally destroys the newly incorporated city. In 1886 CPR workers are burning brush to open up parcels west of the original Gastown core, when the winds picks up. A wall of flame quickly moves east; in less than an hour all but a handful of buildings are destroyed.

The conflagration forces City Council to meet in a tent.

In this iconic photograph includes seven Aldermen and Mayor Malcolm McLaren -parties directly involved in property development.

Within 24 hours new buildings begin to rise and the boom rolls on. Until 1893, when a depression takes hold and land values drop precipitously.

1905 to 1913: Global Capital, v. 1

An influx of British, German and US capital fuels the property market; the Dominion Trust Co. lends to locals according to their real estate collateral. The City’s population triples in a decade. Prices skyrocket: a 52-foot Hastings St. frontage that sells for $26,000 in 1904 reaches $175,000 just four years on.

But its a rickety edifice, ungrounded by local economic realities. With the withdrawal of foreign investment in 1913, it collapses. Like a domino, Dominion Trust crashes a year later, the victim of financial tomfoolery that leaves 5,000 clients high and dry. The City’s population declines 25% by 1916.

1925 to 1929: Irrational Exuberance

The Roaring ‘20s sees a massive build out of downtown’s iconic structures: the Georgia Hotel, the Medical Dental Building, the (third) Hotel Vancouver, and the Marine Building. But you can’t eat bricks and stone: following the stock market crash and into the Great Depression property becomes virtually worthless. A 1935 east end lot can be had for $50, down from its $1,500 peak just a few years earlier.

1946 to 1955: Moving on Out

Servicemen return, the Baby Boom is on and demand for single-family homes opens-up of the suburbs, culminating in the construction of the Second Narrows Crossing and the Oak Street Bridge.

1967 to 1976: Moving on Downtown

Fighting the decline in downtown peninsula property values, the development community -aided and abetted by the Planning Department- drives forward a series of massive redevelopment projects: west end apartment construction, new clusterfucks of office and shopping complexes, highways through Strathcona and Chinatown. The public resists, but there are casualties: requiem in pace Hogan’s Alley.

The Modern Era: Scaling Up

In terms of relative highs and lows, the ’46 to ’55 and ’67 to ’76 booms were not on the scale of earlier iterations. Our more recent history, however, is a return to form. It’s nicely encapsulated by the following, produced by UBC’s Sauder School of Business and based on inflation-adjusted data collected by Royal LePage and calculated by the UBC Centre for Urban Economics and Real Estate:

The speculation on the speculation has yet to yield implosion. But consider: the current boom incorporates all the characteristics of previous eras – global capital influx, urban and suburban theatres, irrational expectations, even bridge construction- as well as a significant new innovation: condominiums, a form of ownership unknown in previous years. After a decade of property value increases, an undying faith in the limitless value of this most liveable city in the world, neighbourhoods hollowed-out by speculation, stifled economic development, the exodus of the squeezed-out, and interest rates so low that you can’t afford not to buy, the CBC reported, just last week and without much fanfare, that the “average home price in Vancouver finally saw a decline in March [2012] at $730,998 from $823,749 in February ….”

If history is our guide, this is going to get ugly -again.