B.C’s housing affordability unlikely to ease

Tuesday, September 1st, 2015

Barbara Yaffe
The Vancouver Sun

According to figures for July from the Greater Vancouver Real Estate Board, the typical price for all types of residential property in Metro Vancouver now stands at than $700,500, up 11.2 per cent in the past 12 months.

For those wondering whether Vancouver’s crazy housing market conditions will ever ease, the answer is yes, probably next year.

According to new property prognostications issued by the Royal Bank of Canada, sales volumes in B.C. are poised to decline in 2016 by nearly five per cent.

That would mark a huge turnaround from this year, with resale housing units projected to be up more than 20 per cent by the end of 2015.

However, the dropping sales volumes do not mean prices will become affordable, only that the pace of the price increases is expected to moderate.

Prices are forecast to increase 7.8 per cent this year for all types of housing, probably more in the Vancouver area. Next year, price growth will run at a more modest 4.9 per cent, the slowest rate in three years, but still the fastest growth rate of any province.

The bank on Monday released its latest Housing Affordability Index, showing housing affordability is nearing the worst level ever seen in Canada.

RBC’s economic research unit says higher interest rates will bring ”deteriorating trends in housing affordability in Ontario and B.C. (which) will take the edge off Canada’s hottest markets in terms of demand, but price momentum is likely to remain more or less intact.”

According to figures for July from the Greater Vancouver Real Estate Board, the typical price for all types of residential property in Metro Vancouver now stands at than $700,500, up 11.2 per cent in the past 12 months.

RBC’s research features a graph showing ownership costs of a detached bungalow in Vancouver, incredibly, gobbles more than 80 per cent of household income. No wonder consignment shopping is all the rage.

That compares with 42 per cent of household income consumed by housing nationally, and 59 per cent in Toronto.

RBC says that affordability is “most stretched” in Vancouver and Toronto, and for the single-family detached housing sector. Construction of single-family houses in Vancouver has fallen by nearly one quarter in the past decade alone, the result of restrictive development policies.

By contrast, affordability conditions for condo apartments in Vancouver, and Toronto, are “just a little worse than it has been on average over the past 30 years”.

B.C. is one of several provinces benefiting from improving labour market trends — its jobless rate for 2015 is forecast to be third lowest in the country, after Manitoba and Saskatchewan — and rock-bottom interest rates.

But the low interest rate party is set to end, RBC says, predicting the Bank of Canada gradually will begin removing monetary stimulus one year from now. Longer term interest rates could increase by the end of 2015.

That will mean fewer people will be able to qualify for the sort of jumbo mortgages being assumed by so many buyers in the Vancouver area. And some may be force to sell properties they no longer can support.

That said, all signs point to the Lower Mainland continuing to be Canada’s toughest housing market.

In its mid-August quarterly house price analysis and assessment, the Canada Mortgage and Housing Corp. identified Toronto, Regina and Winnipeg as at risk of a housing correction, expressing no concern about Vancouver.

The west coast city has a “low overall housing market risk,” due to population growth, a healthy labour market and an absence of overbuilding.

With no significant price reductions in the offing, I predict a growing number of Vancouverites will be renting.

Additional product is becoming available and, as Colliers International reported recently, units built these days increasingly are of condominium quality, with quartz countertops and in suite laundry facilities. The city also is pressing developers to build more three-bedroom units, to accommodate families.

With no corrective action by B.C.’s politicians — they have done little but dither, insisting they are loathe to interfere in the market — buying a house in Vancouver is poised to become an ever more death-defying experience.

© Copyright (c) The Vancouver Sun

Comments are closed.