What’s driving our local housing market?

Housing market watching is a bona fide pastime in Vancouver. It’s no wonder that seldom a week goes by without an attention-grabbing headline proclaiming unaffordability on a global scale, a dangerously threatening bubble or how much a Chinese billionaire paid for a dot com billionaire’s monstrosity of a home.

This overemphasis on the extreme can make it difficult to understand that buyers and sellers are behaving rationally and that market fundamentals are rather sound.

The key driver of housing in Vancouver hasn’t changed. It’s the people who live, work and raise their families here and their life stage, financial wellbeing and confidence that create the ebb and flow of the market.

In spite of the hype about foreign investors, they are a miniscule sideshow compared to the market power of 2.5 million local residents and the roughly 40,000 that call Metro Vancouver their new home each year.

According to the Census, 0.8 per cent of the housing stock in the Vancouver CMA was occupied by foreign and/or temporary residents in 2011, exactly the average for Canada’s CMAs and the same proportion as Victoria and Montreal.

Your feedback in your Board’s monthly poll of members who’ve been involved in a transaction within the past month consistently shows that approximately 2-4 per cent of home sales each month involve foreign investors, however, that is considerably less than the 10-14 per cent that involves local/domestic investors.

Strong population growth led by immigration combined with a limited supply of developable land has caused a predictable escalation in home prices and resulted in housing affordability challenges. However, it has also contributed to housing densification, made rapid transit feasible, and created vibrant urban communities.

While Vancouver is regularly dovetailed with San Francisco and Sydney as unaffordable cities, the same group also top the charts in livability, city infrastructure, and quality of life.

Densification of the housing stock has also made it more diverse. Single detached homes now make up less than a third of all homes in Metro Vancouver, where nearly 80 per cent of new housing starts are multi-family units.

With home builders keeping pace with demand, apartment prices have inched up just four per cent over the past five years, less than the Consumer Price Index. In contrast, single-detached home prices advanced 26 per cent over the same period as a result of strong demand and their relative scarcity.

The multi-million dollar home is more of an exception than a rule in the region. Last year, nearly 70 per cent of all homes sold on Metro Vancouver’s MLS® transacted at a price below $800,000 and 30 per cent less than $400,000.

The local nature of the Vancouver housing market and of housing markets in general obliges knowledge at a similar level.

Market conditions can not only vary between cities and countries, but also between communities and neighbourhoods.

That is one of the reasons why your services, as REALTORS®, are so valuable to the public. Whether they’re buying, selling or renting a home, your expertise can help buyers and sellers make sense of today’s market trends.

April 20, 2015 - Cameron Muir, Chief Economist, BCREA

For more information, please contact Gino Pezzani.

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