Eyebrows were raised this week when an actual junk heap – a burned-down house in Kitsilano – hit the market for $3.99 million. In fact, the story about the super-pricey pile of rubble and wood was easily the most-viewed post on our sister Glacier websites' online Real Estate sections Monday.
The only thing raising this author's eyebrows is that people seem surprised by this story. Sure, it’s outrageous, of course. But aren’t we accustomed to these kinds of outrageous prices by now?
Maybe, unless you are a realtor, investor or developer (or spend your days writing about real estate), you never really get numbed to the idea of paying millions of dollars for what seems like nothing. In this case, a destroyed house with, as the listing puts it, 0 bedrooms, 0 bathrooms, and N/A square footage. The price certainly makes a clickworthy headline, especially when accompanied by the above dramatic picture.
It’s always hard to get heads around the fact that the price is simply not about the house. Obviously, this house would have been a teardown and, frankly, half of the demolition work has already been done. To a developer, that’s a cost saving.
And don’t forget, it’s only a developer who would buy this property (or an investor who will hope to eventually sell it on to a developer at a profit). It’s in desirable Kitsilano, and is RT-8 zoned, which means that a new character-style building in keeping with the neighbourhood would be permitted with multiple dwellings. A developer could likely build, say, a luxury Craftsman-style fourplex with a laneway house at the back, and probably see bags of profit over their original investment.
And that’s under the current zoning rules. The new “Making Room” program by the City of Vancouver is likely to soon slacken the rules even further in RT-8 areas, allowing for further density and relaxed design guidelines in order to encourage more new homes. That move will likely drive this lot's value higher.
This particular listing is a court-ordered sale, and at $3.99 million is likely actually cheaper than it would have been as a regular teardown or land-only listing, of which there are countless in Vancouver right now, at way higher prices. Take for example this $5.68 million, three-bedroom bungalow on Oak Street, which is only worth that price because a developer can buy both it and the lot next door, tear them down and build a luxury townhome development. Or this two-bedroom bungalow, also in the Cambie corridor area, on which lot there is potential for a six-storey condo building. The price? A whopping $12.99 million.
It's not a question of whether it’s right that a bungalow on Cambie should be priced at nearly $13 million, or a burned-down house in Kits should be nearly $4 million – clearly, Vancouver land values have gone nuts. But the value of anything is simply what someone is willing to pay for it. And when it comes to Vancouver real estate, that's an awful lot.
The question now is whether the City’s attempts to introduce more affordable “Missing Middle” homes with widespread densification will work, or whether the new zoning will simply push land values even higher.
Perhaps there comes a price point that even developers will refuse to pay.