Vancouver housing growing more unaffordable: report
Demand for detached homes outstrips supply, economist says
Just when it seemed that housing in Vancouver couldn’t become less affordable, rising prices have put the purchase of a home even more out of reach.
RBC’s latest housing trends and affordability report for the second quarter of 2015 showed a continuing deterioration in market conditions for prospective home buyers.
The housing affordability measure captures the proportion of pre-tax household income needed to service the costs of owning a home at market value.
The measure for the benchmark detached bungalow in Vancouver is 88.6 per cent, up three percentage points from the first quarter.
Across B.C., the measure increased by 2.5 percentage points to 75.3 per cent for a twostorey home, by 2.1 percentage points to 71.4 per cent for a bungalow, and by 0.4 percentage points to 33.3 per cent for condos.
Among all the Canadian provinces, the rise in the percentage, which represents a decrease in affordability, was highest in B.C., continuing a longtime trend.
“It’s a market that is firing pretty much on all cylinders,” Robert Hogue, a senior economist with RBC, said in an interview from Toronto on Monday.
“Vancouver can’t really sprawl. It’s got to goup. It’s got to be higher density or condominiums. ROBERT HOGUE SENIOR ECONOMIST, RBC
He added there simply aren’t enough detached homes to meet the demand and the geographic constraints inhibit the construction of more.
“The chances that we will have a surge in single-family home construction are pretty remote,” Hogue said. “Vancouver can’t really sprawl. It’s got to go up. It’s got to be higher density or condominiums.”
Strong housing demand, particularly for detached homes, produced some of the stronger gains in home prices in the country.
The average price of a detached bungalow in the second quarter was $967,500, up close to five per cent from the first quarter and up more than 12 per cent from a year earlier.
Interestingly, deteriorating affordability didn’t deter resales in the second quarter.
In fact, the resale market was on a roll across most of the province, including Vancouver, Victoria, the Fraser Valley and Kamloops.
Vancouver home resale activity rose by 5.6 in the second quarter, marking the fifth straight quarterly increase.
RBC economists expect B.C. home resales to rise by more than 20 per cent in 2015, projecting this to be the highest increase in the country. Housing affordability also declined in Toronto, while supply and demand are more balanced in other Canadian markets and affordability has been close to the long-term average since 1985.
In a separate report, TD Bank said it expects a decline in Canadian borrowing rates in the first half of 2015 will likely boost demand into the early fall, but then have a waning effect in the late stages of this year.
It says the low-rate environment has helped to keep hot markets “humming” and reduce the impact of low commodity prices in other markets, particularly in Alberta and Saskatchewan.
The RBC affordability measure takes into account income, property prices and the typical costs of home ownership, such as mortgage payments, utilities, taxes and fees.