More than 90 per cent of all detached homes in Vancouver are now worth more than $1 million, up from just 19 per cent a decade ago, a new study by a local urban planner has found, showing how rapidly housing prices have escalated in the Canadian city.

The biggest jump came in the last two years, with the proportion of million-dollar homes in the city climbing to 91 per cent in 2016 from just 59 per cent in 2014, according to the study by Andy Yan, acting director of Simon Fraser University’s City Program.

“This shows how what used to be the earnest product of a lifetime of local work is perhaps quickly becoming a leveraged and luxurious global commodity,” said Yan.

The median household income in Vancouver, meanwhile, rose just 8.6 per cent between 2009 to 2013, according to the most recent data from Statistics Canada. Adjusted for inflation, it would be about $77,000 a year in 2016.

That puts typical incomes well below the threshold needed to purchase million-dollar homes, said Yan, noting other factors must be driving the sharp increase in home values in Vancouver.

“It’s global cash, meeting cheap money, meeting limited supply,” he said, adding that all three factors are working to “magnify each other” and drive further speculation.

Foreign investment has long been blamed for soaring housing prices in Vancouver, with the most recent wave of offshore cash coming mostly from mainland China.

A widespread corruption crackdown launched by Chinese president Xi Jinping in late 2012 has led to massive currency outflows, which have coincided with a sharp jump in housing prices in Vancouver’s prime neighborhoods.

The new data comes as Canadian Prime Minister Justin Trudeau is in Vancouver for a two-day visit. Trudeau on Thursday said that his government needs to take measures to ensure residents of cities like Vancouver and Toronto can afford housing.

Yan’s study looked at provincial assessment data, which lags sales data by several months, and was focused exclusively on the roughly 67,000 detached homes in the City of Vancouver. All values were adjusted for inflation.

Region-wide, the price of a detached home soared 130 per cent over the last 10 years to hit $1.5 million in May, according to the local real estate board. Adding in apartments and townhomes, the typical home in Greater Vancouver now costs $889,100.

Source: Julie Gordon, Reuters
http://business.financialpost.com/personal-finance/mortgages-real-estate/nine-out-of-10-vancouver-houses-now-worth-more-than-1-million-study-finds

Real estate prices in key global cities are rising at a slow, moderate pace, particularly in Europe.

According to new research published by international real estate consultant Knight Frank, 35 of the world’s most important cities saw an average price increase of 3.6% in the year to March 2016.

“Since 2014 the index has consistently seen annual growth of 3-4%, with no city recording double-digit annual price declines since the second quarter of 2015,” notes Kate Everett-Allen of Knight Frank, who carried out the study.

However, Everett-Allen found some notable differences both between regions and within them. In North America, for example, New York, Miami and Los Angeles grew by 2.3%, 3.8% and 5.1% respectively but Vancouver saw a spectacular 26% rise in real estate prices — despite a 1% increase in land transfer tax on purchases above CAD2M.

Australasia was more homogeneous, with both Sydney and Melbourne posting a 12% rise. The two African hubs were also in positive territory, albeit with some difference between the two—Cape Town went up 6.9% and Nairobi up 3.3%. Asia was rather more of a mixed bill, with excellent growth in Shanghai (to the tune of 20%) but sizeable drops in Hong Kong and Taipei (down 6.4% and 7.6% respectively.

In Europe, real estate growth was modest and fairly consistent across the majority of cities, with prices either remaining flat or recording small rises of less than 3%. Only Moscow, Paris, Milan and Monaco bucked the trend. The first three saw dips (of 5.9%, 2.7% and 1.2% respectively) while Monaco recorded a 4.9% rise.

However, says Everett-Allen, some of these numbers need to be analysed in the context of past performance. Prices in London, for example, only grew by 0.8% in the year to March, the lowest figure since October 2009
 — but the British capital had experienced a period of exceptional growth in earlier years so a slowdown was natural.

Interestingly, the Knight Frank study also showed that, across the world, the impact of new transparency rules, new taxes or fees for foreign buyers—all of which are seeing a surge in global hubs—varies hugely depending on the pre-existing fundamentals and market cycles.

Thus, the land transfer tax rise had no depressive effect in Vancouver, nor did new transparency rules for cash buyers affect the New York and Miami markets. In London, by contrast, a series of changes to stamp duty land tax and to purchases by non-domiciled residents, have amplified the market cycle and helped slow down price growth.

Source: Carla Passino, Forbes http://www.forbes.com/sites/carlapassino/2016/05/19/slow-and-steady-real-estate-growth-in-world-cities-is-an-exercise-in-moderation/#108e2b7349c6

Strong demand in Metro Vancouver – Canada’s hottest real estate region – has pushed typical detached home prices past the $1-million mark, with February sales well above average.

Who is purchasing the homes, and how can they afford them? Offshore buyers are stepping up, as are people capitalizing on low interest rates and renting out suites, according to Ray Harris, president of the Real Estate Board of Greater Vancouver.

The benchmark price for a single family home in Metro Vancouver is now $1,026,300, up 9.7 per cent over February 2014, according to the real estate board.

Benchmark properties represent a typical residential home in a given market, and in Richmond, Burnaby, Vancouver and North Vancouver, single-family benchmark homes now exceed $1 million.

Several other Lower Mainland municipalities are creeping up to the million-dollar mark, including Port Moody at more than $900,000, and Coquitlam at more than $800,000.

Despite the hefty increases, the real estate board says buyer and seller activity was strong in February, with home sale and listing totals beating the region’s 10-year average for the month by 20 per cent.

“It’s an active and competitive marketplace today. Buyers are motivated and homes that are priced competitively are selling at a brisk pace,” Harris said.

He attributed the growth in sales to offshore buyers, Vancouver residents moving out of the core and record low interest rates. Buyers are now taking out larger mortgages and covering them by renting out suites in their houses, he said.

“How can people afford a million-dollar home? Well if they have an income of $3,200 from two suites, all of a sudden it’s more affordable,” he said. “You are going to see a lot more suites and sharing of the costs.”

Andrey Pavlov, a professor of finance at Simon Fraser University’s Beedie School of Business, sounded a cautionary note, describing the boom as “of great concern.”

“People are clearly using the (tiny) drop in interest rates to over-extend themselves even more,” he wrote in an email, adding that he saw the drop in interest rates and sharp decline of the dollar as “symptoms of a very weak Canadian economy.”

Residential property sales in the region reached 3,061 on the Multiple Listing Service — a 21 per cent increase over the same month last year and a 60 per cent increase over January 2014. The benchmark price for all Metro Vancouver residential properties rose to $649,700, 6.4 per cent above February 2014.

Even the recently stale condominium market is gaining traction, with recent price increases above the rate of inflation — something that hasn’t been seen for several years, said Cameron Muir, chief economist at the B.C. Real Estate Association.

Muir said home sales should continue to increase, though record sales levels are unlikely this year or next. The sales figures, while strong, were beating averages that had been depressed for a few years, he said.

“Sales will be above your longer-term averages. We’re kind of ratcheted up to another level that we haven’t seen in a number of years, and that’s being backed by some pretty solid economic fundamentals,” he said, including low interest rates, a strong economy and low gas prices that help to raise confidence.

New listings for detached, attached and apartment properties in the region totalled 5,425 in February, a 15.4 per cent increase compared to the 4,700 new listings reported in February 2014.

The sales-to-listings ratio was 25.7 per cent, the highest since March 2011, according to the board.

“Total homes for sale on the marketplace has really steadily declined … and as a result we’ve seen marketplace conditions go from buyer’s market conditions in 2012 to now cusping on that seller’s market territory in 2015,” Muir said.

Meanwhile, sales of all property types were up by 21 per cent in the Fraser Valley, according to the Fraser Valley Real Estate Board.

Board president Jorda Maisey said it was the busiest February since 2007, with 1,337 homes sold in the Fraser Valley — compared to 1,102 the year before. The number of new listings declined by four per cent.

The benchmark price of a single-family detached home in Abbotsford in February was $450,200, 3.9 per cent higher than in February 2014. The price of a townhouse was $228,600. The benchmark detached home price in Langley was $585,900 and it was $945,300 in White Rock-South Surrey.

Source: Tiffany Crawford and Matthew Robinson, Vancouver Sun

That view, expressed recently by Business Council of B.C. executive vice-president Jock Ferguson, reflects the sentiments of many.

However, similar observations have been made in the past. Still, the cost of housing in the Vancouver area has kept climbing. It is impossible to predict when the pricing peak truly will be reached.

Greater Vancouver’s January home price index for a single detached home hit a record $1,010,000, up 8.4 per cent from one year earlier.

The rental market is equally daunting, with a low vacancy rate and hefty rents, especially for condo units.

Behind the problem of unaffordability is, and always has been, the law of supply and demand. There is no indication this force soon will be diminishing.

Greater Vancouver is attracting tens of thousands of newcomers a year, both from other countries and provinces.

For wealthy foreign migrants, the housing situation likely poses no obstacle. But most local buyers and renters, and migrants from other provinces, are not in a position to pay high rents or $1 million-plus to purchase.

Influential architect Michael Geller recently played host to a Simon Fraser University lecture, titled: 12 Affordable Housing Ideas For Vancouver. Unsurprisingly, it was so well attended that many would-be registrants were turned away.

Geller is calling for a two-pronged approach that would:

• have those wishing to live here reducing expectations about the size of housing they require and their need for two-car garages and granite countertops;

• have city planners become more creative and flexible with zoning, and building rules and regulations.

Specifically, Geller wants Vancouver-area planning departments to permit designs that maximize land use and have been tried successfully elsewhere.

Designs would, for example, allow construction of a cluster of small cottage-like homes on a single large residential lot; and designs that would extend construction of a house or apartment buildings right to side-lot property lines, as in dense European urban cores. Municipalities could more liberally permit construction and sale of micro suites of 300 to 400 square feet, laneway and coach houses and allow townhouses and duplexes to accommodate basements, which then could be rented as crucial mortgage helpers.

The city of Vancouver is well aware it has a severe housing affordability problem, having established an arm’s length affordable housing agency in 2014 to find ways of supplying more housing at more reasonable prices.

But the agency has yet to launch a much-needed public discussion about innovative proposals such as Geller’s. The public deserves a chance to digest the prospect of further densification.

Early action clearly is needed in the face of the ever-escalating property prices.

Source: Editorial, The Vancouver Sun