Feb 2018 20

Vancouver Real Estate: Lack of Affordable Inventory in January 2018

Posted by
Brenda Kinnear

Charles Dickens once wrote "And though home is a name, a word, it is a strong one; stronger than magician ever spoke, or spirit ever answered to, in the strongest conjuration".

A home is one of the most sought after, wished for, impossible dreams in Metro Vancouver today. Affordable home ownership or rental accommodation is unavailable to most of the local younger population, even those with stable jobs and professions. Family formation is put on hold for lack of available housing. A perfect storm of world wide circumstances has created a situation that governments are only now starting to address and they can make little headway without a complete reordering of the existing tax and real estate ownership laws.

The high prices and lack of affordable inventory mean that the basic building blocks of an active informed working community are not there. Nobody can afford to move here to work. Those who already live here can’t afford to stay. Nurses and teachers and social workers and first responders are shut out of the housing market by the high prices. There is no time for a teacher to take on extra-curricular activities when the drive to and from work can be hours long. The Vancouver School Board has had difficulty filling job openings because when teachers have an opportunity to work in a school district closer to home they take it. In Richmond schools are slated for closure because there are no young families moving into the multi-million dollar homes available, many of which are owned but empty.

Douglas Todd of the Vancouver Sun has explored the connection of the 1% vacancy rate in Vancouver to the increased competition of Vancouver’s young adults with international students, foreign workers and financially supportive offshore parents to buy a home or find a place to rent. In Metro Vancouver the number of non-permanent residents has doubled to 140,000 over the last 10 years. A CMHC report shows international students and temporary workers under the age of 25 are responsible for 10% of the bank mortgages issued to that age group in Toronto and Vancouver.

Vancouver City Centre from above by Alex Costin

Construction workers are at a premium because no one can find a place to live within a reasonable driving distance of a project; commuting times are aggravated by the lack of infrastructure and highways. When workers are enticed to Vancouver from other cities they almost never want to take up the opportunities offered. The traffic and the housing costs are a huge deterrent.

Employers in desirable expensive locations such as downtown Vancouver or the North Shore cannot get employees because no one working at a lower hourly rate is willing to spend the money or the time to commute the required distance for these jobs. Highways and bridges are jammed at rush hour with workers leaving jobs in places where they used to be able to live to commute to far flung suburbs.

Tech entrepreneurs are finding it difficult to recruit new qualified employees because of the housing crisis. Potential employees are attracted to the urban centre of Vancouver but there is no affordable housing available to rent or buy. Everyone is wondering where the thousands of Microsoft and Amazon employees are going to reside.

There is a huge outpouring of younger families to other cities in BC where housing is still more expensive than most parts of Canada but much more affordable than the Lower Mainland.

Benjamin Tal, deputy chief economist for CIBC Capital Markets when comparing Toronto and Vancouver stated that Vancouver is an island with no place to build or grow so no reasonable way to moderate housing prices.

"Demand remains elevated and listings scarce in the attached and apartment markets across Metro Vancouver," as stated by President Jill Oudil of the Real Estate Board of Greater Vancouver. "Buyers in the detached market are facing less competition and have much more selection to choose. For detached home sellers to be successful, it’s important to set prices that reflect today’s market trends."

A disturbing unknown is the effect of the new mortgage stress tests. Anecdotally they are having an impact on the number of sales as many buyers can no longer qualify for the same mortgage loan as before. They now have to qualify for a loan 2 points above the loan they actually qualify for under today’s lower rates which have also gone up in the last month.

The Globe and Mail has published another series of investigations into the extensive drug money laundering mortgage loans at extremely high interest rates to Mainland Chinese citizens who buy or own property in Vancouver. The borrowers are loaned cash in Canada to be repaid in Chinese currency through the shadow banking system in China. Often the drug dealer mortgagees take the clients to court to get their usurious fees repaid. Canadian courts accept false affidavits and order properties sold to repay these illegal loans. These mortgages are enabled and registered by Canadian lawyers who do not ask questions about the source of funds. The Supreme Court has allowed lawyers to police themselves and not be forced to disclose any damaging information about their clients. It’s only public demand for change that will force the governments to act.

The Vancouver Sun published an article linking money laundering, drugs and guns in Metro Vancouver.

The sales to active listing ratio for January 2018 is 26.2%. By property type, the ratio is 11.6% for detached homes, 32.8% for townhouses, and 57.2% for condominiums.

In January 2018 the benchmark price for a detached home across the region was $1,601,500. An 8.3% increase from January 2017.
In January 2018 the benchmark price for a detached in North Vancouver was $1,670,100 up 5.5% in one year, up 80.0% in 5 years and up 89.1% in 10 years.
In Richmond the benchmark price was $1,690,500 up 8.2% in one year, up 80.2% in 5 years and up 132.9% in 10 years. In Vancouver East the benchmark price was $1,564,000 up 8.6% in one year, up 91.1% in 5 years and up 140.2% in 10 years. In Vancouver West the benchmark price was $3,548,400 up 3.8% in one year, up 77.6% in 5 years and up 129.1% in 10 years. In West Vancouver the benchmark price was $3,099,500 up 5.7% in one year, up 70.8% in 5 years and up 99.3% in 10 years.

Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of inventory.

In January 2018 the benchmark price for an apartment property across the region was $665,400. This was a 27.4% increase from January 2017. In January 2018 the benchmark price for a condo apartment in North Vancouver was $567,200 up 22.9% in one year, up 64.7% in 5 years and up 62% in 10 years. In Richmond the benchmark price was $649,900 up 33% in one year, up 89.1% in 5 years and 90.9% in 10 years. In Vancouver East the benchmark price was $552,300 up 25.9% in one year, up 84.4% in 5 years and up 91.4% in 10 years. In Vancouver West the benchmark price was $812,400 up 21.9% in one year, up 76% in 5 years and up 76.9% in 10 years. In West Vancouver the benchmark price was $1,179,400 up 20% in one year, up 66.2% in 5 years and up 70.9% in 10 years.

The BC Government has been promising action in their Budget to be presented in the Legislature on February 20. They may bring in regulations to require full disclosure of financing sources for mortgages, of disallowing bare trusts where beneficial ownership of properties is undisclosed, adding a speculation tax and forcing absentee owners to pay full taxes. We shall see what really comes down and how enforceable it may be.

More anon.


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