Fourth quarter regional highlights:
- Price of detached homes continue to outpace condominiums as Canadians trade location for square footage
- Despite strong push toward the suburbs, Toronto and Montreal single-family homes see double-digit price gains in city centres
- Median price of a two-storey home in Greater Vancouver rises 8.8% as buyers prioritize square footage
- Out-of-region buyers spur Maritimes’ home prices, as option of remote work and demand for large, affordable properties grows
- Aggregate price of a home in Canada rose $206,815 since Q4 2015
TORONTO, Jan. 15, 2021 /CNW/ – According to the Royal LePage House Price Survey released today, the aggregate1 price of a home in Canada increased 9.7 per cent year-over-year to $708,842 in the fourth quarter of 2020, as strong seller’s market conditions continued to shape Canada’s real estate market through the end of the year. The significant year-over-year increase in aggregate price was driven by price gains for larger properties. Sixty-four per cent of all regions surveyed showed year-over-year median price gains of more than 10 per cent for two-storey homes.
The Royal LePage National House Price Composite is compiled from proprietary property data, nationally and in 62 of the nation’s largest real estate markets. When broken out by housing type, the median price of a standard two-storey home rose 11.2 per cent year-over-year to $840,628, while the median price of a bungalow increased 10.0 per cent to $592,899. The median price of a condominium increased 3.9 per cent year-over-year to $509,239. Price data, which includes both resale and new build, is provided by Royal LePage’s sister company RPS Real Property Solutions, a leading Canadian real estate valuation company.
Aggregate prices are calculated using a weighted average of the median values of all housing types collected. Data is provided by RPS Real Property Solutions and includes both resale and new build.
“In April 2020, we issued our pandemic period forecast for Canadian real estate, the principle prediction being that unexpectedly soft spring home prices, historically low interest rates, and years of pent-up demand would trigger a sharp recovery of sales volumes and rising property prices in the second half of the year,” said Phil Soper, president and CEO of Royal LePage. “As we close the books on the strangest year in my long career, ‘recovery’ proved to be an understatement. Looking at fourth quarter results we can state without hyperbole that the health crisis triggered a real estate boom.
“High levels of unresolved housing demand and low inventory levels will likely characterize the 2021 spring market, putting further upward pressure on housing values, particularly in the detached and larger townhome segments, as families with access to extremely low borrowing costs trade traditionally desirable urban locations for more personal space,” he continued.
Nationally, Ontario posted the highest year-over-year aggregate home price gains in dollar value during the fourth quarter. During this period, the aggregate price of a home in Markham increased $133,932 to $1,100,436, the highest dollar value increase in aggregate home price. Markham was followed by Vaughan, which increased by $132,699 to $1,130,483; Burlington, which increased by $115,475 to $950,796; Pickering, which increased by $110,905 to $856,725; and, Oakville, which increased by $109,912 to $1,215,405.
“Confined to their homes, Canadians are struggling to adapt their properties to accommodate the need for an office, school classroom and gym, and find themselves longing for more living space,” said Soper. “Yet buying a house is not like buying a car; for most it is a long-term commitment. Post-crisis, some employers will be accommodating of work-from-home employee requests, and some businesses will require that their teams work together in offices again. Many will adopt a hybrid model. Home shoppers should look at prospective neighbourhoods through a post-pandemic eye, paying careful attention to the things that will matter when we drop our masks, including restaurants, access to entertainment and even walkability.”
Soper added that the surge in sales that characterized the second half of the year is a sign that Canadians feel confident buying and selling properties during the pandemic.
“The real estate industry has shown that buying and selling property can be done safely as much of the search and purchase process can now be done online,” he said. “Our real estate agents can help families looking for a home with efficient digital showings. Physical private viewings of a short-listed property should be done in compliance with best practice and public health guidelines. Clients can use their phone or computer to complete the transaction, leveraging today’s advanced technologies.”
While many Canadians have been seeking larger homes outside of urban centres, demand for properties in Canada’s largest urban centres have remained high. Ottawa’s aggregate price increased 14.9 per cent year-over-year to $568,608 during the fourth quarter, the greater regions of Montreal, Toronto and Vancouver increased 12.4 per cent, 10.4 per cent and 7.2 per cent to $487,380, $936,510 and $1,155,346, respectively.
Strong demand in the fourth quarter also resulted in price stability in Canada’s energy and agriculture regions. During the period, the aggregate home price in Saskatoon, Regina and St. John’s increased year-over-year by 6.3 per cent, 3.4 per cent and 0.8 per cent to $400,173, $327,517 and $325,833, respectively. Edmonton and Calgary’s aggregate home prices remained relatively stable, dipping 0.1 per cent and 0.5 per cent to $372,515 and $467,041, respectively.
Demand from local buyers and those relocating back to the Maritimes put significant upward pressure on prices. During the quarter, Halifax posted the highest increase in aggregate price, rising 17.1 per cent year-over-year to $377,469. Charlottetown posted the second highest increase in aggregate price rising 12.7 per cent year-over-year to $344,823, during the same period.
In December 2020, Royal LePage issued its 2021 forecast stating that the national aggregate price of a home is expected to increase 5.5 per cent year-over-year. To read more about Royal LePage’s national and major urban centre forecast, please go to rlp.ca/2021-forecast.
Greater Toronto Area
The aggregate price of a home in the Greater Toronto Area (GTA) increased 10.4 per cent year-over-year to $936,510 in the fourth quarter of 2020. Broken out by housing type, the median price of a standard two-storey home increased 11.9 per cent year-over-year to $1,102,155 in the fourth quarter, and the median price of a bungalow rose 12.8 per cent year-over-year to $923,047. During the same period, condominiums in the region continued to see healthy price appreciation, with the median price rising 3.6 per cent year-over-year to $593,811.
With the exception of condominiums, similar strong home price gains were seen in the City of Toronto where the aggregate price of a home rose 7.4 per cent year-over-year to $960,368 in the fourth quarter. Broken out by housing type, the median price of a standard two-storey home increased 10.6 per cent year-over-year to $1,446,184, and the median price of a bungalow rose 12.3 per cent year-over-year to $1,001,083. During the same period, the median price of a condominium grew 1.4 per cent year-over-year to $634,081.
“Throughout the second half of 2020, buyers were looking for as much space as they could afford. While many buyers shifted their target neighbourhood away from the city centre, so few properties for sale meant that most detached listings saw multiple-offer scenarios,” said Debra Harris, vice president, Royal LePage Real Estate Services Ltd. “2020 did bring some balance to the region’s condominium market but larger units, often in the greater region, are still in high competition.”
Harris added that pent-up demand in the GTA remains significant for detached homes and inventory levels will be a leading indicator of price appreciation in the spring market.
“The GTA real estate market could absorb a short-term influx of detached home listings and remain in a seller’s market. If inventory remains low, prices can only go up,” said Harris.
In December, Royal LePage issued a forecast projecting that the aggregate price of a home in the Greater Toronto Area will increase 5.75 per cent in the fourth quarter of 2021, compared to the same quarter in 2020.
Greater Montreal Area
In the Greater Montreal Area, the aggregate price of a home posted a 12.4 per cent increase year-over-year reaching $487,380 in the fourth quarter of 2020. When broken down by housing type, the median price of a standard two-storey home increased 13.6 per cent year-over-year to $619,099 in the fourth quarter, and the price of a bungalow rose 15.3 per cent year-over-year to $391,493. During the same period, condominiums in the region continued to see strong price appreciation, although at a slower pace than single-family homes, with the median price rising 8.1 per cent year-over-year to $367,113.
In the core of Montreal, the aggregate price of a home rose 10.8 per cent year-over-year to $613,268. Broken out by housing type, the median price of a standard two-storey home increased 13.3 per cent year-over-year to $836,790, and the price of a bungalow rose 12.1 per cent year-over-year to $582,225. During the same period, the median price of a condominium grew 7.1 per cent year-over-year to $442,317.
“Conditions were favourable to make 2020 a year of strong growth for Montreal’s real estate market,” said Dominic St-Pierre, vice-president and general manager of Royal LePage for the Quebec region. “During the first wave of the health crisis, it was difficult to predict how it would impact the economy and, more importantly, consumer behaviour. We could have seen a price correction if buyers had left the market. But low interest rates, combined with increased household savings from remote work and new buyer incentives, played a key role in a market that was already highly competitive before the pandemic. In the suburbs and on the Island of Montreal, activity in the single-family segment resulted in double-digit price increases in most neighbourhoods of the Greater Montreal Area.
“Historically, the Montreal core has always been the hottest spot for both sales activity and prices. No one could have predicted before COVID-19 that the pace of markets on the outskirts of Montreal would outpace the city,” said St-Pierre.
In December, Royal LePage issued a forecast projecting that the aggregate price of a home in the Greater Montreal Area will increase 6.0 per cent in the fourth quarter of 2021, compared to the same quarter in 2020.
The aggregate price of a home in Greater Vancouver increased 7.2 per cent year-over-year to $1,155,346 in the fourth quarter of 2020. Broken out by housing type, the median price of a standard two-storey home increased 8.8 per cent year-over-year to $1,507,279 in the fourth quarter, and the median price of a bungalow increased 6.8 per cent to $1,265,285. During the same period, the median price of a condominium increased 3.3 per cent year-over-year to $662,120.
In the city’s centre, the aggregate price of a home rose 5.7 per cent year-over-year to $1,306,820 in the fourth quarter. Broken out by housing type, the median price of a standard two-storey home increased 7.3 per cent year-over-year to $2,113,504, and the price of a bungalow rose 4.1 per cent year-over-year to $1,424,474. During the same period, the median price of a condominium grew 3.9 per cent year-over-year to $784,351.
“Multiple offers were common throughout the fourth quarter and almost every detached home was attracting competitive bids. Buyer confidence is strong and current low interest rates make purchasing even more attractive,” said Randy Ryalls, general manager, Royal LePage Sterling Realty. “Buyers are worried they will be priced out of the market and with our low inventory of homes for sale in the region, prices are expected to go up in the spring.”
Ryalls added that while new listings slowed in the fourth quarter, which is consistent with seasonal trends, the pipeline of buyers continues to grow.
In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Greater Vancouver will increase 9.0 per cent in the fourth quarter of 2021, compared to the same quarter in 2020.
The aggregate price of a home in Ottawa increased 14.9 per cent year-over-year to $568,608 in the fourth quarter of 2020. During the same period, the median price of a two-storey home increased 14.8 per cent to $595,991, while the median price of a bungalow increased 15.9 per cent to $588,320, and the median price of a condominium increased 13.8 per cent to $385,525.
“The strong seller’s market is expected to persist through 2021, as demand continues to outpace supply in Ottawa,” said Jason Ralph, managing partner, Royal LePage TEAM Realty. “The city is more affordable than Vancouver or Toronto and that’s attractive to both first-time buyers and young professionals from across the country, especially those with families.”
Ralph noted that prices are set to continue a steady upward climb as potential buyers who were unsuccessful purchasing in 2020 re-enter the upcoming spring market.
In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Ottawa will increase 11.5 per cent in the fourth quarter of 2021, compared to the same quarter in 2020.
The aggregate price of a home in Calgary dipped slightly by 0.5 per cent year-over-year to $467,041 in the fourth quarter of 2020. During the same period, the median price of a two-storey home decreased 0.5 per cent to $512,107, while the median price of a bungalow increased 0.5 per cent to $493,164, and the median price of a condominium decreased 3.7 per cent to $248,840.
“Calgary remains an attractive place to purchase a home, partly due to its affordability relative to other major cities in Western Canada,” said Corinne Lyall, broker and owner, Royal LePage Benchmark. “With inventory levels the lowest we’ve seen in nearly two decades, specifically in the single-family detached market, I expect a brisk spring market in 2021.”
Lyall added that all signs point to continued stability in the region as an increase in immigration next year will likely create new opportunities for investors, and those looking to relocate to the region as remote work remains a viable option for many.
In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Calgary will increase 0.75 per cent in the fourth quarter of 2021, compared to the same quarter in 2020.
The aggregate price of a home in Edmonton dipped slightly by 0.1 per cent year-over-year to $372,515 in the fourth quarter of 2020. During the same period, the median price of a two-storey home remained flat at $427,530, while the median price of a bungalow increased 0.4 per cent to $360,996, and the median price of a condominium decreased 1.3 per cent to $217,141.
“Edmonton’s housing market has been relatively flat throughout the pandemic, with sellers hesitant to list their homes due to safety concerns. However, the resilience of Edmonton’s home prices during the pandemic is reassuring to both buyers and sellers,” said Tom Shearer, broker and owner, Royal LePage Noralta Real Estate. “I anticipate a brisk spring market, as consumer confidence rises once a vaccination plan is well underway.”
Shearer added that demand for detached homes, driven by young families, remains strong and low inventory in this segment of the market is expected to put upward pressure on prices in the new year.
In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Edmonton will increase 1.5 per cent in the fourth quarter of 2021, compared to the same quarter in 2020.
The aggregate price of a home in Halifax increased 17.1 per cent year-over-year to $377,469 in the fourth quarter of 2020. During the same period, the median price of a two-storey home increased 17.5 per cent to $399,282, while the median price of a bungalow increased 19.4 per cent to $335,744, and the median price of a condominium increased 4.0 per cent to $301,615.
“Inventory levels have hit historic lows in recent months, putting continued upward pressure on prices,” said Matt Honsberger, broker and owner, Royal LePage Atlantic. “Local buyers are looking for more space, and now, more than usual, they are competing with out-of-province buyers, many of whom are returning to the Maritimes. The option of remote work has altered the landscape of the real estate market.”
Honsberger added that many new construction projects are experiencing delays due to uncertainty surrounding the pandemic, further contributing to the supply shortage.
In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Halifax will increase 7.5 per cent in the fourth quarter of 2021, compared to the same quarter in 2020.
The aggregate price of a home in Winnipeg increased 7.1 per cent year-over-year to $330,273 in the fourth quarter of 2020. During the same period, the median price of a two-storey home increased 11.4 per cent to $372,915, while the median price of a bungalow increased 3.7 per cent to $307,841, and the median price of a condominium increased 0.2 per cent to $231,500.
“That remote work will remain an option indefinitely is a reality for many Canadians, resulting in continued high demand for homes with more space,” said Michael Froese, broker and manager, Royal LePage Prime Real Estate. “As long as the supply shortage continues in Winnipeg and the surrounding communities, prices will remain buoyant.”
Froese added that the pace of sales has been exceptionally brisk. In the fourth quarter of 2020, the median number of days a detached home spent on the market was ten, compared to 27 during the same time period in 2019.
In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Winnipeg will increase 4.75 per cent in the fourth quarter of 2021, compared to the same quarter in 2020.
The aggregate price of a home in Regina increased 3.4 per cent year-over-year to $327,517 in the fourth quarter of 2020. During the same period, the median price of a two-storey home increased 4.2 per cent to $402,903, while the median price of a bungalow increased 2.1 per cent to $295,421, and the median price of a condominium rose 8.2 per cent to $222,210.
“The trend of steadily increasing prices that we’ve seen over the last year in Regina will likely extend into the spring, as the need for more space continues to drive demand,” said Mike Duggleby, broker and owner, Royal LePage Regina Realty. “We are experiencing an inventory shortage, like many cities in Canada. Until supply can keep up with growing demand, prices will keep climbing.”
Duggleby added that the return of international students to the region will put further upward pressure on prices, specifically in the condominium segment.
In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Regina will increase 2.75 per cent in the fourth quarter of 2021, compared to the same quarter in 2020.
Royal LePage Home Price Data:
Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q4-2020
Royal LePage Royalty-Free Media Assets:
About the Royal LePage House Price Survey
The Royal LePage House Price Survey provides information on the three most common types of housing, nationally and in 62 of the nation’s largest real estate markets. Housing values in the Royal LePage House Price Survey are based on the Royal LePage Canadian Real Estate Market Composite, produced quarterly through the use of company data in addition to data and analytics from its sister company, RPS Real Property Solutions, the trusted source for residential real estate intelligence and analytics in Canada. Commentary on housing and forecast values are provided by Royal LePage residential real estate experts, based on their opinions and market knowledge.
About Royal LePage
Serving Canadians since 1913, Royal LePage is the country’s leading provider of services to real estate brokerages, with a network of over 18,000 real estate professionals in over 600 locations nationwide. Royal LePage is the only Canadian real estate company to have its own charitable foundation, the Royal LePage Shelter Foundation, dedicated to supporting women’s and children’s shelters and educational programs aimed at ending domestic violence. Royal LePage is a Bridgemarq Real Estate Services Inc. company, a TSX-listed corporation trading under the symbolTSX:BRE. For more information, please visit www.royallepage.ca.
SOURCE Royal LePage Real Estate Services
For further information: Katie Raskina, Proof Strategies, [email protected], (416) 969-2709
Windsor's real estate market is 'affordable' — but how affordable is it for Windsorites? – CBC.ca
Windsor’s real estate market is booming — but it has some Windsorites feeling left out, unable to seal the deal on finally owning their very own home.
“I’m probably never going to own a home unless the market crashes,” said 28-year-old Elizabeth Ward.
Ward and her partner first started looking to purchase a home a couple of years ago, hoping for one within their $200,000 budget, but they quickly gave up, knowing they couldn’t compete with the bidding wars.
“We kept looking and kept trying but had to give up because there’s no way that we could go anywhere near [$100,000], let alone the $200 and $300,000 that some houses are going over now,” she said.
“So, we look and then we get discouraged, and then we give up.”
Working in retail, Ward makes between $30,000-$40,000 a year, but together with her partner, their joint income is around $60,000-$70,000. This gets them a pre-approval rate of about $200,000, which she says isn’t enough — even during their initial search two years ago.
“We’re both making like over minimum wage and this is still kind of where we’re at,” Ward said.
‘Not affordable for the people who live here’
And yet, Windsor still has a reputation for being relatively “affordable” compared to other markets.
In January, the average price of a Windsor-Essex home was $492,480 — an increase of 31.4 per cent compared to the same month last year. And yet, according to the Canadian Real Estate Association, that price tag is still less than the average January prices in the London area ($607,431), Hamilton-Burlington area ($787,840) or Toronto area ($967,885).
“We’ve been bragging about affordability for so long,” said Maggie Chen, a broker of record with LC Platinum Realty.
“But is that what it is now? Is that what it is in 2021?”
Ward said it’s true Windsor is affordable — “but not for Windsorites.”
“It’s affordable for other people in the province. For the locals that live here, it’s not even close to being affordable,” she said.
“It’s affordable to the people with more money who live outside of Windsor.”
While Chen, who also sits on the board of directors for the Windsor-Essex County Association of Realtors (WECAR), couldn’t quantify what percentage of buyers are from out-of-town, she said that anecdotally — according to what she’s hearing from agents — most buyers are from outside of the region.
What can an average income buy you in Windsor?
According to Windsor’s 2016 Census Profile from Statistics Canada, the average employment income in 2015 for full-year full-time workers in Windsor was $64,962, which was slightly more than incomes in London or Hamilton, but about $14,000 less than the average income in Toronto.
So, what can that income buy you?
According to Windsor mortgage agent Rasha Ingratta, today, a $65,000 income could get you a mortgage of about $300,000.
However, in January 2021, out of 437 homes sold that month in Windsor-Essex, just 67 of them sold for less than $300,000, according to data from WECAR.
That means that for the average Windsorite, only 15 per cent of homes would have met their budget that month. Only four per cent of homes sold for less than $200,000 in January. It was a similar break down in February.
Further to that, a new federal regulation came into effect in 2018 that puts every lender through a financial stress test, to make sure they can afford the mortgage they’re trying to take out. That’s raised the bar for all Canadian would-be home-buyers, not just those in Windsor.
There’s also been a real shift locally, Ingratta explained, in how much bang you can get for your buck. For example, she said, homes worth $200,000 five years ago could now be selling for more than double the price today.
“If we can turn back time and the person that makes $40,000 a year, they can afford to buy that home,” Ingratta said.
“The $40,000 income person now is really giving up on purchasing a home here unless they have a co-signer or more of a down payment.”
‘Lower your expectations’
Looking forward, Chen doesn’t see the market slowing down.
“I used the word crazy in the very beginning of this market,” said Chen.
“Then I switched to insane. And now, I can’t even use that word anymore. The market is exploding.”
Chen explained that many of her buyers are scared that if they don’t jump into the market now, they might not be able to afford it down the road. She acknowledges it’s especially challenging for young professionals and younger families.
A number of factors continue to drive prices up, including high demand and low supply. At the end of January, there were 421 homes listed on the market, which is the lowest number that month has seen in the region in more than 3 decades, according to the local realtors’ association.
And with out-of-town buyers coming in, if they’ve sold a home in a bigger city where prices are higher, then they come to Windsor with an economic advantage that makes then better suited to play the bidding war game, which drives average prices up.
Chen said, it’s not impossible to enter the market on a tight budget, but it does mean people need to “lower [their] expectations.”
For example, Chen explained, $450,000 could have possibly bought you a 1,500 square-foot, raised ranch, single-family home in South Windsor five years ago — but not today.
“Something around $300,000, still, it’s not like it’s not possible,” she said.
“It’s still possible, however the way the market goes, if that is your affordability, your budget, you might have to act fast — or the only option is to rent and leave that dream behind a little bit.”
Windsor still catching up to other cities, Chen says
Meanwhile, Ward continues to keep an eye on the market, but it continues to be discouraging.
“Honestly, it hurts,” she said. “I get very upset and overwhelmed by it pretty often.”
Not only are housing prices going up, but the cost of rent is also going up — it increased by about 8 per cent last year. She and her partner are looking at larger apartments to rent for their family, but Ward worries about what that will cost them.
“[It] makes us laugh when the banks go, ‘We don’t want you paying over what you can pay.’ But instead they’re forcing us to pay even more than that because rent is so much higher than a mortgage would be.”
As Ward hopes for the real estate bubble to burst, Chen doesn’t see that happening anytime soon.
“Absolutely not. We are still catching up,” she said.
Why BC isn't doing anything to cool the red-hot real estate market | Urbanized – Daily Hive
Metro Vancouver’s housing market is again red hot, with record sales, skyrocketing prices and outrageous bidding wars across the region. But if you are hoping for the BC government to jump into the fray and wrestle the real estate sector back down into some semblance of normalcy, well, don’t hold your breath.
There are no real estate taxes on the horizon from the province, and no dramatic housing policies sitting in the hopper ready to launch.
The government is idling in wait-and-see mode, hoping its previous measures, including a speculation and vacancy tax on empty homes, will be enough of a drag to eventually slow things down.
That’s unlikely, say experts. But it’s also not necessarily the wrong move. The worst thing that could happen is for ham-fisted politicians to veer into the market with vote-getting proposals that inadvertently pop the real estate bubble, tank prices and put everyone who has purchased in the last couple of years underwater on their mortgages.
Where’s the outrage?
The last time Metro Vancouver’s housing market was this hot, the public had their bullhorns out for BC politicians to do something to fix it.
It was 2016, house prices were at record highs, and the pressure was so intense for government intervention that the then Liberal government rushed out the Foreign Buyers Tax – a special 20 per cent levy on foreign nationals who everyone was convinced at the time were snatching up all the real estate in the Lower Mainland.
The market cooled for a bit, before roaring back to life later in 2017.
Premier John Horgan’s NDP government was put on the defensive this time, quickly launching a “speculation tax” designed to – and stop me if you’ve heard this one before – target foreign nationals who everyone was convinced were snatching up all the real estate in the Lower Mainland.
This time the allegation was the foreign buyers were leaving the condos and properties vacant, robbing locals from the ability to rent or purchase the unused properties.
Prices chugged along at a relatively inoffensive pace after that, before taking a dive at the start of last year’s pandemic and then roaring back to new record heights.
We’re back to 2016 levels now across the region – sales in February were up 43 per cent higher than the 10-year sales average, and 73 per cent from the same time last year.
But missing this time is the 2016 level of public outrage. There are no online petitions, protests or court challenges on provincial real estate policies.
That means there’s relatively little pressure right now on politicians to do anything to help. Which is interesting, because the BC government isn’t sure what it could do to cool the market, even if it wanted to.
Hard to blame foreign buyers anymore
The buying frenzy is being driven in part by pent up demand, scarce supply, low interest rates and an affluent middle class emerging from COVID-19 in surprisingly solid financial shape.
Those folks have the purchasing power to seek out larger homes that have offices and backyards to give them more space to weather the rest of the pandemic. That’s not a group of voters the government particularly wants to target.
They aren’t easy villains to be hit with extra taxes, like foreign buyers or out-of-province speculators. They are instead the same kind of middle class British Columbians the NDP has promised to help with housing affordability in the last two elections.
“In the short run that phenomenon that people are substituting towards larger detached homes and they don’t care about the commutes as much – I don’t think government really should do anything about that,” said Thomas Davidoff, director of the University of BC’s Centre for Urban Economics and Real Estate.
“In the long run, there’s supply and regulation and opening up suburbanized space to more urban uses.
“That’s unquestionably the long policy. It will do nothing in the short run, especially to detached housing prices. But it’s the right way to tackle affordability in the long run.”
It’s not possible for governments to blame skyrocketing prices on foreign buyers anymore, either.
There is essentially zero foreign real estate speculation going on in the local market right now, said Brendon Ogmundson, chief economist at the BC Real Estate Association.
COVID-19 travel restrictions have put immigration and foreign investment a stand-still, for now.
The driving force on upwards prices are millennials getting into the market for the first time, and their parents who are cashing out equity in the homes they bought decades ago to help fund their children’s real estate ambitions through what’s called “intergenerational wealth transfer,” said Ogmundson.
That may be a big reason there’s no public outrage at the market and pressure on politicians to act.
“A lot of it is first-time buyers,” said Davidoff.
“If you go to an open house and you see a bunch of kids duking it out over the same house, maybe you’re less angry.
“I think in 2016, there were certainly sub-segments where you would see people who didn’t appear to be local seemingly being a large share of the open house – and I want to say that as delicately as sensitively as possible.
“But I suspect if there’s an anger issue … in 2016, a lot of it was outside money, and now it’s people recognize it’s just people want space and have good affordability.
“The other side of the affordability, driving it, is that when the bank tells you you can borrow a huge amount of money that makes you happy, and willing to pay a lot.”
The unsexy solution: supply
Experts have been consistent about the real solution to the housing affordability crisis since way back in 2016: More supply.
Building more and varied types of housing, including apartments, condos and townhomes. Getting permits through municipal councils faster, instead of tied up in years of red tape. Extracting density bonus payments out of developers who want to build taller, and using that money to help fund affordable housing projects for those who need a hand-up into the market.
“What we’ve seen the past several years is that the government has introduced measures to try and slow demand,” said Ogmundson.
“That’s a war that you can’t really win. Demand is going to change pretty rapidly. What we’ve seen with demand-side policies, is you can slow the market for a year maybe a year and a half… but eventually the market is going to turn, the economy is going to get better, interest rates will get lower and we’ll be right back in the situation where demand has grown and the market is strong.”
Government can do a lot to help grow the supply of housing in the province. But it’s not very sexy, and it’s behind-the-scenes work that takes a long time. It’s not cash in your pocket today. And it won’t help you from getting outbid by 10 other people on that townhouse you can barely afford in Langley.
“The problem is that at any one time there’s a lot of different factors driving home prices,” said Ogmundson. “We can’t just stick on one thing and say we’ll fix this part and that’s the solution to our problems.”
The current NDP government announced a 10-year plan in 2017 to boost housing supply, with the creation of more than 114,000 new units. Some have been built. But it’s a numbers game so far, that has barely made a dint in demand.
“There isn’t an easy solution to this problem,” said Ogmundson. “Even fixing supply is difficult.”
Politicians don’t really want prices to go down
Both the previous B.C. Liberal government and the current NDP government have been hesitant about getting too directly involved in the housing market because of worry whatever they do could abruptly tank the value of homes and collapse the real estate bubble.
That might sound attractive to someone looking to buy their first home. But a sudden drop in prices would put all the people who just purchased massively expensive properties underwater on their mortgages.
It would hurt the moms and dads who cashed out some of the equity in their family home to give it to their children to help them afford to get into today’s wild market. And it would hurt some of the older owners, who are counting on the ever-rising value of their home as a type of lottery winning to fund their retirement.
The resulting backlash would be huge. No politician in this province wants to face that, regardless of their political stripe.
So expect the current political plan to continue – picking away at the edges of housing affordability with a few projects and policies here and there, but nothing so bold as to upset the apple cart.
The hope from Victoria under two different governments now for the past several years is that the market, ultimately, will sort itself out. The alternative – forcing its decline – could be even worse.
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