Greater Vancouver’s home price gains during the pandemic have lagged behind most other Canadian jurisdictions as well as those in the United States, in stark contrast with the region’s unprecedented increases in the mid-2010s, when the provincial government intervened on foreign demand.
“It’s a different ballgame,” said Tom Davidoff, associate professor and director of the Centre for Urban Economics and Real Estate at the University of British Columbia.
“This is enhanced affordability for locals pushing up prices, as opposed to diminished affordability for locals, full stop, due to outside pressure.”
This time around, local residents – seen as the primary driver of the housing boom – have been able to access a greater pool of money with their relatively stagnant wages due to lower interest rates and more accessible bank credit. Adding to the housing froth has been heightened demand for suburban properties with more living space due to the COVID-19 pandemic, Davidoff says.
But these factors are being witnessed across North America.
Canada’s home prices have jumped 17.3%, whereas Greater Vancouver’s have risen just 6.8% between February 2020 and February 2021, according to the Canadian Real Estate Association. U.S. house prices rose 10.8% from December 2019 to December 2020, according to the Federal Housing Finance Agency (FHFA) House Price Index.
Despite the continental surge, some Vancouver-based media commentary has asked, “Where is the outrage?” now, in comparison with the significant political pressure applied on the B.C. government in 2017, when housing prices rose 48.5% over the prior three years, according to the Real Estate Board of Greater Vancouver (REBGV).
Then, foreign ownership – and money derived from foreign earnings – was perceived as a unique factor further disassociating local incomes (residents) from local housing prices in Vancouver.
Now, foreign purchases are down significantly in B.C. and immigration has vanished.
“The outrage was, you know, people who want to get into the market can’t, and renters are paying more. This time, it’s different, because the reason prices have escalated, in part, is because of enhanced affordability through the mortgage market,” said Davidoff.
“So instead of another group crowding out local demand, which was part of what was happening in 2016 – you know, how much of a part is controversial – but now, it’s pretty clear, it’s that people have more ability to pay,” he added.
People have more ability to pay because Bank of Canada (BOC) interest rates are at an all-time low of 0.25%. Furthermore, BOC is buying government bonds (debt) from financial institutions, allowing them to lend more freely and at historically low interest rates.
This process, called quantitative easing, “encourages households and businesses to borrow, spend and invest,” states BOC. “For example: We can buy five-year government bonds, which will lower their yield. This would be reflected in lower interest rates on five-year fixed-rate mortgages, making it cheaper to borrow to buy a house.”
The BOC has indicated low rates are here for the near term, at least until 2023.
Davidoff elaborated that suburban housing markets, such as in the Fraser Valley, have typically been cheaper as people factor in higher transportation costs. But buyers appear to be betting that working from home could become permanent.
“I think it’s true that the virus has made people want more space. Out in the suburbs, there’s more space, which is what you want. And the issue of transportation has been diminished,” said Davidoff.
Urban planner Andy Yan says outrage over housing still exists but “it’s a different type of outrage if you’re totally locked out of ownership, as opposed to moving on up.”
Yan, director of Simon Fraser University’s City Program, suggests people are leaving their condos and paying more for the suburbs.
Although Vancouver’s overall price change is 6.8%, detached homes are up 13.7%, townhouses are up 7.2% and apartments are up only 2.5%, according to the REBGV. However, the Fraser Valley Real Estate Board reports 25.3% price gains in all housing forms since February 2020.
“I think there is outrage. But it just depends on who you are,” said Yan, who has been criticized for his 2015 report suggesting overseas Chinese buyers fuelled the remarkable 2014-17 gains.
“My point wasn’t only just foreign money. But it was foreign money with cheap money, right? Now we have a scenario where cheap money completely takes over the environment,” said Yan.
Another difference between then and now, said Davidoff, is how rents have remained the same in Vancouver, due, in part, to government intervention (rent freezes through to December 2021). And so, a significant population is not faced with higher housing costs during the pandemic.
Yan said it is those renters who likely have had their incomes “vaporized” due to the pandemic.
“If you look at the core of unaffordability, it’s both very high housing prices with relatively low, very, very low paying jobs,” said Yan.
Both Yan and Davidoff suggest housing prices are now at a level of risk not seen before, should interest rates rise and transportation demands return to the pre-pandemic era.
The total proportion of Metro Vancouver residential properties owned by non-residents in 2018 reached 4.9% while “some non-resident participation” in properties amounted to 7.6%, according to the Canadian Mortgage and Housing Corporation (CMHC). International students who file an income tax return are considered residents by CMHC. Last year, the CMHC reported these figures have remained the same.
B.C. introduced a foreign homebuyers tax in August 2016 and a so-called “speculation and vacancy tax” in 2018. Stricter mortgage requirements (“stress tests”) were also applied then by the CMHC, leading to house prices dropping in Vancouver in 2019.
Cracking down on potential crime and tax avoidance/evasion has also been an issue in Vancouver real estate. The B.C. government is conducting a public inquiry into money laundering that is to look at the regulatory regime in real estate. And between 2015 and 2020, a special Canada Revenue Agency audit program has issued $729.1 million of tax reassessments linked to Greater Vancouver real estate.
PGIM Real Estate, Revera Affiliate Target UK Market in Newly Formed JV
PGIM Real Estate has been active in recent months providing capital to facilitate blockbuster senior housing acquisitions. Now the firm is looking to capitalize on demand for senior housing in the United Kingdom.
The Madison, New Jersey-based real estate investor and lender announced this week it is entering into a joint venture with Signature Senior Lifestyle, an affiliate of Revera, to develop and operate senior housing communities around greater London
Mississauga, Ontario-based Revera serves 20,000 older adults in long-term care homes and retirement residences in Canada. It is also the majority shareholder of Sunrise Senior Living, one of the largest senior housing providers in the U.S. The company operates a portfolio of 12 communities in the U.K. under the Signature Senior Lifestyle brand, with one community in development that is slated to open in autumn 2021.
The JV has one development underway — a senior housing community, or “prime care” home, in southwest London. PGIM worked with Elevation Partners, a London-based investor and asset manager in U.K. health care real estate, in sourcing, structuring and executing the venture. Additionally, PGIM will retain the firm to leverage its expertise.
PGIM and Revera did not respond to requests for comment from Senior Housing News regarding details about its development pipeline.
London is emerging as a future hotbed of senior housing development, spurred by favorable demographic growth trends and a lack of available supply, and the PGIM-Revera venture will find competition.
Maplewood Senior Living CEO Gregory Smith told SHN last month that demand for U.K. senior housing is comparable to major U.S. markets such as New York and San Francisco, where supply has historically been constrained.
Maplewood and its investment partner, Omega Healthcare Investors (NYSE: OHI) are looking to expand its luxury Inspir brand to the U.K., and identified five suburban markets around London with high barriers to entry that are favorable for the brand’s growth.
Revera CEO Tom Wellner sees similar untapped upside potential for senior housing in the U.K.
Source: – Senior Housing News
Where in Canada are house prices increasing the most? Maybe not where you think – CTV News
Canada saw a surge in housing prices over the past year due to COVID-19, a market trend experts say is caused by people working from home more often and moving to rural and suburban areas.
Data released by the Canadian Real Estate Association (CREA) shows that when comparing the average market prices from February 2020 to February 2021, Canada had a 25 per cent year-over-year increase. The average price rose from $542,484 to $678,091.
“One factor is that with work-from-home even more generalized, many people don’t have to live within commuting distance from their jobs,” Shaun Cathcart, senior economist at CREA, told CTVNews.ca. “That means that folks who own condos and smaller homes can take out built-up equity and move to a property that better meets their needs – as over the past year, home is not only where you eat a few meals and sleep, but also the office, your kids’ school, playground, gym, etc.”
The largest year-over-year percentage changes came from the Northwest Territories (48.1%), Nova Scotia (30.4%), Ontario (24.5%), Quebec (22.5%), and New Brunswick (20.9%).
Cathcart noted that the higher percentage change in Northwest Territories is likely due to the fact that in both February 2020 and February 2021, six homes were sold throughout the entire territory and the ones that were sold in 2021 were marked at a higher price.
When looking at the provinces and territories that had the largest upsurge in terms of price difference, Ontario sits at the top of the list with an increase of over $170,000. Northwest Territories came next, followed by British Columbia, Nova Scotia, and Quebec.
The data also shows that prices in suburban and rural areas were impacted the most and saw the biggest changes, with regions like Rideau-St. Lawrence and Sarnia-Lambton in Ontario averaging about a 50 per cent increase from the previous year.
“With people no longer having to live within commuting distance to their jobs, as long as suburban and rural areas have decent internet, they become even more attractive to families looking for more space,” said Cathcart.
Find your region and the year-over-year price and percentage change below.
Cathcart says that Canadians can expect to see sales and prices increase this year, but forecasts sales to slow down in 2022 while prices remain high.
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