And the band played on... Julie and I were recently in the Halifax Maritime Museum and viewed the stories of the sinking of the Titanic.The belief was that the Titanic was indestructible, therefore did not need lifeboats for every passenger. When the rescue ship Carpathia that was 4 hours away arrived on the scene the passengers wearing life jackets in the water were dead of hypothermia, the passengers in the life boats survived.
The Vancouver housing market reminds me of the Titanic saga. At the beginning of the story mistaken assumptions were made as to the safety and buoyancy of the Vancouver market. No thought was given to the Law of Unintended Consequences. The City did not think of zoning restrictions because of voter backlash; the provincial government wanted the windfall income from the Property Transfer Tax, the federal government wanted to borrow money from new immigrants so set up the Immigrant Investor program with no mechanism to enforce residency requirements or income tax payments or rules to keep the money as an investment in Canada. Now we have our two major cities Toronto and Vancouver full of the Haves and the Have Nots mainly broken down along generational lines. And the market continues to rise. The MLS Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,042,300, a 12.4% increase over October 2016.
The sales to active listing ratio for October 2017 is 33.1%. By property type, the ratio is 16.8% for detached homes, 44.8% for townhouses and 66% for condominiums.
In October 2017 the benchmark price for a detached home in North Vancouver was $1,700,200 up 2.1% in one year, up 76.9% in 5 years and up 95.8% in 10 years. In Richmond the benchmark price was $1,690,000 up 2.3% in one year, up 73.4% in 5 years and up 139.4% in 10 years. In Vancouver East the benchmark price was $1,566,700 up 3.3% in one year, up 86.2% in 5 years and up 145.3% in 10 years. In Vancouver West the benchmark price was $3,626,300 up 1.8% in one year, up 75.8% in 5 years and up 140.3% in 10 years. In West Vancouver the benchmark price was $3,095,300 down -5.4% in one year, up 68.4% in 5 years and up 102.4% in 10 years. Each year affordability declined for local buyers.
There was news this month of Amazon expanding their workforce in Canada. They have expanded by 1000 people in Vancouver and 750 in Calgary. Many observers feel that this expansion is in replacement of a new head office that if it opens in Canada will probably be in Toronto. According to the Amazon vice President for Canada and Mexico the jobs in Vancouver are 90% for software engineers and programmers. The very people who will be looking for homes and rental apartments. Of which there are very few available in Vancouver so again there is another competition for relocating employees to either buy or rent accommodation.
In October 2017 the benchmark price for an apartment property across the region was $642,000. This was a 22.7% increase from October 2016. In October 2017 the benchmark price for a condo apartment in North Vancouver was $556,900 up 21.5% in one year, up 56.5% in 5 years and up 60.6%in 10 years. In Richmond the benchmark price was $609,600 up 26.3% in one year, up 76.2% in 5 years and 82.2% in 10 years. In Vancouver East the benchmark price was $538,500 up 19.7% in one year, up 74.6% in 5 years and up 90.6% in 10 years. In Vancouver West the benchmark price was $806,500 up 18.5% in one year,up 66.4% in 5 years and up 62.4% in 10 years. In West Vancouver the benchmark price was $1,163.100 up 18.5% in one year, up 66.4% in 5 years and up 62.4% in 10 years.
Jobs are prized by municipal authorities but there are many openings and few applicants because of the lack of affordable housing. The Vancouver School Board cannot fill open teaching positions because no new teachers want to bear the cost of living in the city. The City of Vancouver is looking to license and control short term accommodation such as Airbnb in order to open up more long-term rentals. The big question is around enforcement. Every action has an equal and opposite reaction and the cost of implementing new ideas can often be the deterrent to doing so.
Douglas Todd of the Vancouver Sun wrote that statistics Canada data shows 140,000 non-permanent residents residing in Metro Vancouver including international students and temporary workers competing with locals for a few rentals and pushing the prices up and up and up.
According to a recent Century 21 report the west side of Vancouver is the most expensive area in Canada. It has increased 400% in 20 years and currently a typical benchmark home comes in at $1,200 per square foot. Using this model downtown Vancouver comes second at $863 per square foot and Toronto follows at $819 per square foot. The purpose of these numbers is to give consumers a realistic idea of how much money they need to buy a home in different areas.
Of course if a buyer cannot qualify for a mortgage under the new stress test where a borrower has to qualify for two percentage points higher than the mortgage for which they are approved all the information is moot. The Financial Post had an article on the rush to qualify and purchase a home before the end of the year. Most buyers if they have a substantial down payment don’t want to jump through the hoops of the new mortgage rules. The question arises in the article as to whether there will be any buyers left in the New Year when the stress test kicks in and the easily qualified buyers have already purchased.
The Bank of Montreal chief economist forecasts continuing action in the housing market from move-up buyers who have built up equity. He believes that Canada is a huge draw to international buyers and that immigrants will be the source of new buyers at every level.
According to SFU Assistant Professor Josh Gordon, writing in the Vancouver Sun, fairness to the next generation of buyers would require a surtax on all homes in Vancouver which is refunded to those paying Canadian income tax. His estimate is that the Canadian citizens who can’t afford to buy a house are subsidizing these non taxpaying residents to the tune of at least $100,000 per year thanks to Canada's lax and unenforced tax laws.He says that it’s no wonder vast numbers of wealthy foreign individuals are lining up to buy properties in Canada. The idea of a surtax is popular but the application of one is more difficult. The devil is in the details. When Professor Gordon hears objections to possible economic turbulence caused by a surtax he wonders how we can think that BC’s economy should depend on tax avoidance.
He writes: "Ultimately, young working Vancouverites are subsidizing the global elite that is pushing them out of their childhood city –an incredibly toxic dynamic."
A chilling statement that brings us back to those few lifeboats floating off the doomed Titanic so long ago.