Bob Ransford
Sun
How much must a home cost before its owner (at least) might consider it a trophy home? I am not talking about your upper-middle class executive-style home or your edge-of-the-city hobby-farm home. I am talking about the kind of home that we used to call a “mansion” — the home of your dreams.
Perhaps you are already living in your dream home. But everyone has bigger dreams. Everyone dreams of that trophy home — a real luxury palace with features that would indulge your wildest fantasies.
The kind of mansion I am talking about is probably located on a signature property in an exclusive neighbourhood. It is sprawling in size, finished with the finest of materials and built by craftsmen. It has superb architectural detailing, probably a separate guest suite, servants’ quarters, more than one home-entertainment room. It might have a pool with a pool house, a detached garage and more.
If money were no object and you could buy that trophy home what would you expect to pay for it?
It doesn’t seem that long ago that you mentioned the million dollar price tag and you were most certainly talking about a mansion. Now, a million dollars gets you little more than a West Side move-up on a standard lot.
The sky-rocketing trend in real estate prices has certainly had as much impact on the top end of the housing market as it has on the middle and bottom ends of the market.
Recently, I was doing some research for a magazine article I am writing on luxury homes in Canada‘s big cities and I was trying to peg the price threshold for luxury homes in Vancouver.
A search of homes for sale on the MLS in Vancouver revealed that there were 367 homes listed for sale in the $1 million to $2.5 million price range. Almost a third of them were apartments or townhouses. Of the remaining 281 single family homes, all but two of them were located on the city’s West Side.
Most of these homes appeared to be your average upper-middle class large home. Few of them boasted of the features typical of a real mansion. Fewer still were in signature locations.
Then I started to think that the price threshold for luxury homes was at about the $2.5 million mark. Well, when I looked at the data, the market seemed too deep at that level. There were simply too many homes listed in the range just above $2.5 million to make that part of the market exclusive enough to categorize as the luxury market.
There were 84 homes listed for sale in Vancouver at prices above $2.5 million and 18 of them were apartment homes. None of them were trophy homes.
It wasn’t long before I concluded that the luxury trophy home market in Vancouver starts at about the $4.2 million price level. The average home price in Greater Vancouver in June was $422,843. That means a home worth $4.2 million is about 10 times the cost of the average priced home.
I haven’t been able to find any data that compares the ratio of luxury home price to average home price over time, but I suspect the ratio of 10 to 1 is near the highest it has ever been.
A survey of luxury homeowners in the U.S. last year indicated that the overwhelming majority felt that interest rates hikes have little effect on their luxury spending. Sounds like it is a pretty secure part of the market.
Meanwhile, Canada‘s RBC Financial Group last month predicted that, with B.C.’s strong provincial economy and its scarcity of land, house prices will continue to go up and housing affordability in B.C. is expected to get even worse.
What does that mean for the price threshold for trophy homes? Is my $4.2 million benchmark too low? Who is it that can afford a real mansion at these rising prices?
I would like to hear what you think.
Bob Ransford is a public affairs consultant with COUNTERPOINT Communications Inc. He is a former real estate developer and a director of the Urban Development Institute – Pacific region. Email: [email protected]
© The Vancouver Sun 2005
