The affordability of Vancouver’s housing market has had a record-breaking month and it’s propping up Canada’s average – in a not-so-positive way.
National prices for single-family homes rose 0.4 per cent from December to January, the largest monthly rise in five months (especially when contrasted with a 0.1 per cent rise in December) followed by a 4.5 per cent increase from last January. The news comes from the Teranet-National Bank Composite House Price Index – an index which tracks price changes for repeat sales of single-family homes.
Prices Higher Than The Rockies
But at the heart of the rising cost of homes is Vancouver, where prices rose by 1.1 per cent.
The closest second – Toronto and Quebec City – only saw a 0.5 per cent rise, followed by a 0.4 per cent rise in Calgary, 0.3 per cent in Hamilton and 0.2 per cent in Montreal and Winnipeg.
Messing With The Big Picture
While the cost of real estate in Vancouver is integral to painting an accurate portrayal of the price tag for Canadian city life, outliers – like these major urban centers – have a tendency to skew the big picture.
“All real estate is local,” says Dr. Ian Lee, assistant professor of strategic management and international business at Carleton University’s Sprott School of Business. “However, it can be said that we have the ‘average’ Canadian housing market and separately we have Toronto and Vancouver housing markets which are far from average.”
Sky-high housing prices like those experienced in Vancouver eclipse other cities, driving up the national average and muddling the actual cost of houses in urban centers.
After all, Vancouver has one of the least affordable housing markets, second only to Hong Kong, according to Demographia’s 10th annual survey of 360 housing markets in nine Western countries.
Price Shock Not Stopping Vancouver Home Buyers
But record-high housing prices haven’t stopped people from continually colonizing the coastal metropolis.
In January, 1,760 residential properties changed hands, a 30.3 per cent increase from the same month in 2013, according to the Real Estate Board of Greater Vancouver. Seems like a steep uptick – but it’s hardly shocking.
Anyone who’s perused the cobblestone-tiled streets of Gastown or spent the afternoon in Stanley Park can attest that the city is beautiful, idyllic even – a mecca for the sustainably minded.
Its temperate climate makes its weather perhaps the most attractive in Canada and its proximity to the Asia-Pacific gateway makes it an ideal landing point for immigrants (and developers) from Asia.
Prices Pushed By Short Supply
A shortage of land, tucked in between the spine of the Rockies on the east, the Pacific on the west and the U.S. to the south helps to slow the expansion and restrict development, making real estate there all the more coveted.
These factors have ensured that demand exceeds supply year after year, driving up prices, says Lee.
But the rising prices of homes in outliers, like Vancouver, also alter the demographics of the cities themselves.
“(Toronto and Vancouver) exhibit tendencies of international cities such as London, NYC, and Hong Kong where the middle class have largely been priced out of the market as owners,” says Lee. “This means that in order to work in those cities, ordinary consumers will either have to rent or be prepared to commute long distances if they want to buy.”
Look Between The Outliers
“The good news is that these trends do not apply to other Canadian cities,” says Lee.
Despite Vancouver’s ongoing real estate rally and promises of more expensive houses, analysts still expect the rest of the country to see a softening in prices.
“Despite the uptick in home prices, we maintain the view that prices will soften,” says Mazen Issa, senior Canada macro strategist at TD Securities. “Very favorable financial conditions are expected to erode as continued tapering by the Federal Reserve and a more robust growth backdrop lead to higher mortgage rates.”