Housing Market in the City of Vancouver
Does the city have enough zoned land, if so, why do prices keep increasing? Should we rezone more land along transit lines?
Affordability or price is the result of the interaction between supply and demand. If demand exceeds supply then price has to go up. Demand will be spurred by:
- A robust economy in BC – the GDP has increased annually since 2011
- Positive provincial net in-migration – Intra-provincial from January to June 2016 is 13,164, International for the same period is 18,565 an annual equivalent for total immigration of 63,458
- Increasing rental rates, which make home ownership a more logical alternative – According to Tom Davidoff (UBC professor) “Between April and August 2016, rents for both one and two bedroom units increased 15 per cent”. According to “rentboard.ca”, the average listed monthly rent in City of Vancouver for one bedroom is $2,006, and 2 bedroom is $2,841
- Continued low mortgage rates – 2.66% fixed-rate for 3 years with CIBC
- Population growth – City of Vancouver states current population is 631,486, a 4.4% increase from 2011 census.
- Wealth transfer - $197 billion in equity for properties owned by those over 55 in Greater Vancouver.
Michael Ferreira’s (Urban Analytics Inc.) analysis showed that sales were in excess of new units coming on stream in 2016 in all municipalities. Demand was always ahead.
The company also prepared an analysis of changes in supply and the effect on price Q1-2015 to Q1-2016 for townhouse, low-rise and high-rise. Supply dropped some 63-80%. Price rises during that period were from 15-40%. Projects sold faster than supply was added which caused a price escalation. Demand was enhanced by “urban refugees” moving east to find accommodation they could afford. The supply for the City of Vancouver dropped by 80-89%, dependent upon type and area.
A study of the number of units sold to determine a fall or rise in demand is impeded by any restriction on supply. Few units available, few sold. Evidence of rising price is a better determinant of demand.
In the City, for 2016, multi-family (MF) Building Permits were 462/month, but encouragingly, the # is well above the 5-year average 2010 to 2014 of 297/month. In 2015, it was 479/month. It is encouraging that for the first two months of 2017 the # was 701/month. That said, a recent announcement by The Goodman Report was that “11,784 market rental units, making up 105 buildings, are under construction, approved or proposed throughout Metro Vancouver.” Hence a number of units processed by the City may well be rental (no city data available) and will put further pressure on the City Building permit approvers for condominiums projects, potentially reducing the number of new condo buildings being approved.
Urban Analytics estimate that there will be potentially 3,500 units coming on stream in 2017 in the City, which is 292 per month, significantly below the last two years when demand exceeded supply.
19 new condominium projects totaling 1,727 units were launched in 2016 on the west side of Vancouver, by the end of December over 75 percent were sold. In East Vancouver 99 percent sold out of 341 on the market and in Downtown 94 percent of 876 units released were sold.
The current situation for new condominiums is enflamed by the fall in listings on MLS. There was a drop in new listings for Jan-Feb 2017 (475/ month) by 25% compared to the same period in 2016.
The average # of new MLS listings in each month for the City of Vancouver for 2012 to 2016 from the Greater Vancouver Real Estate Board was 692. The 2016 figures are skewed due to a significant fall off after the announcement of the foreign buyers tax.
The number of listings is falling. If demand continues or even drops a little, the city still has an equilibrium problem. It is apparent from these statistics that there is insufficient supply and that is why prices are rising.
Currently zoned properties would permit 40,837 multifamily units to be built. Based upon projected City permits of 4,000 per year, this is 10 years supply. There are also a further 35,420 designated units yet to go through the re-zoning process.
The City has in theory, lots of supply, BUT it only becomes supply when it is built. The availability of supply assumes:
- Building permits approved
- That zoned land owners want to sell
- That current use is no longer highest and best use
- Demand for units in zoned areas
Or, in a nutshell, there must be desired sites available. If not, supply will be restricted. Furthermore, if the City does not approve more permits annually, then supply will continue to fall behind.
In conclusion, the evidence supports insufficient available supply in the City. Lack of supply and an imbalance with demand will continue to cause rises in prices. It is irrelevant what the capacity might be, if there are no appropriate sites available. Supply in the City is unable to meet demand, and hence the addition of more units, that are economically viable, is a necessity. Density on transit lines is an acceptable and sustainable model. It gives the city residents many benefits and places the burden of cost on those who benefit. But regardless, City Hall must approve more condominium units.
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