Demand for real estate
The demand for real estate in Vancouver is at an all-time high, but house prices are now beginning to wane. Home prices in the Metro Vancouver area have increased by more than 20% year-over-year in September. Meanwhile, the supply of homes on the market has remained well below long-term trends. Hence, a housing bubble is likely to burst. A housing bubble is a condition where house prices can’t rise much further than the trend.
The prices of Metro Vancouver houses have increased significantly in the last few months, driving more potential home buyers out of the market. Prices of condos have decreased in recent months, despite being traditionally the first rung on the property ladder. While prices will likely fall, buyers will take heart in the fact that they are still well above the 10-year average. Ultimately, however, the bubble will burst. But, for now, there is still plenty of time to buy a condo.
According to TD Economics, the Canadian Real Estate Association and other experts, the Vancouver housing bubble may be over. According to the association, house prices in the city fell by an average of three to five percent in the first five months of 2021. That’s because there were almost no non-Canadian home buyers in the north and east of Vancouver in the first five months of the year. Instead, 60 properties of at least $5 million were sold in this area, but no foreign buyers were involved in the deals.
The recent announcement by the Trudeau government to ban blind bidding and foreign speculation is a direct reaction to the recent real estate bubble in Vancouver. While the government says it supports fair competition, the fact that foreign investors are allowed to purchase residential property in Canada is another matter. Critics blame the foreign investors for driving up the price of homes and have proposed new ideas to help fix the real estate bubble. But the government has been criticized for its lukewarm response, and the real estate industry is divided over whether or not the plan is really beneficial.
While the government is working to increase transparency and eliminate the need for blind bidding, there’s still no reliable data on the number of homes sold or who won the auction. The lack of transparency in the process makes it difficult to gauge the effect of blind bidding on housing affordability. But a central repository of data would help regulators determine whether the practice is responsible for the current housing affordability crisis. Until now, blind bidding in Vancouver has been the norm.
In the recent budget, the federal government announced plans to end blind bidding and implement the Home Buyers’ Bill of Rights. However, some housing experts and realtors have pushed back against the government’s proposal to ban blind bidding. They argue that the province should be free to decide how to sell a home, and they should not be forced to ban the practice altogether. The government will also study other real estate markets and ask consumers and market experts for recommendations on how to make blind bidding a thing of the past.
The Chinese influx has fueled a speculative boom in the housing market in Vancouver, Canada. The real estate market is notoriously unprepared for foreign money, which quickly led to housing prices outpacing local incomes, which are among the lowest of any major metro area in the country. Foreign money helped create a financialised economy in Vancouver, with real estate, home construction, mortgage lending, and speculation boosting the city’s booming economy. This in turn attracted local investors to the hot housing market.
The BC government has done little to cool the market, and it’s unclear what it can do to curb the over-the-top prices. The housing bubble is largely driven by pent-up demand, a lack of supply, and a growing affluent middle class. Many of these buyers are foreigners, and many have solid financial status. They’re looking for bigger homes and more space, and the government doesn’t want to target this segment of the market.
Since the beginning of this bubble, there have been several attempts by governments to curb foreign demand. In the province of British Columbia, the Liberals and Conservatives have both pledged to put a ban on foreign homebuyers for two years. The New Democrats, meanwhile, have proposed taxing non-Canadians with a 20% levy. The latter plan was adopted after the government imposed a similar tax on non-residents in British Columbia.
The recent study on the “unaffordability of the Vancouver housing market” showed how much the speculative bubble in Canada had caused the city’s cost of housing to spiral out of control. The study concluded that Vancouver and Toronto housing markets are among the most unaffordable in the world. This fact is not surprising, as the cost of housing is often higher than median wages. Young people, particularly those who are unemployed, have very little wiggle room to absorb disruptions in their income. As a result, job losses may lead to drastic spending cuts to meet their mortgage payments.
While the city’s high prices may be out of control, politicians and experts are taking action to help citizens get back on their feet. The government of Canada is implementing a new plan to increase construction, freeze foreign purchases of residential real estate for two years, and ban blind bidding. However, experts question whether this plan will do much to help homeowners and property investors alike. In this article, we’ll take a look at the Liberals’ plans to combat the affordability crisis.
Home prices have risen to record highs in Metro Vancouver, the most expensive in North America. This has pushed prices out of reach for many first-time homebuyers. In the second quarter of 2021, Ottawa and Vancouver were ranked as the most expensive cities. In Toronto, one-bedroom rentals are now more than $2,000. This means that renters are spending more than 30% of their income on shelter.
With the global economy teetering on the edge of a recession, it is conceivable that Vancouver’s housing bubble could be in danger of bursting. Incoming investment dollars, which have helped Vancouver’s housing market surge, are unlikely to be enough to prop it up. Besides, local residents simply cannot afford the higher prices. If a Vancouver housing bubble is about to pop, a credit contraction is inevitable.
Unaffordable housing prices in BC have had a negative effect on young families. As a result, many young millennials have put off having children and are now sunk deeper in debt, while others have opted to move elsewhere. This “brain-drain” effect is creating a situation whereby young people cannot afford to stay in their homes. But the effects of high prices are felt far beyond the real estate market.
Despite recent predictions of a global economic recovery, economists have warned that a Vancouver housing bubble is still possible. In addition to a sharp drop in homebuilding, a housing bubble has led to eleven of the 14 recessions since 1929. While a housing bubble is not a sure sign of a future recession, a sudden slowdown in residential construction is a reliable early indicator. The housing market in Vancouver is now at its highest levels in a decade.
While the current population of Vancouver is increasing, the city is far behind its neighboring cities. In the five years leading up to the last census, Vancouver grew by just 0.9%. In contrast, cities such as Lethbridge and Sylvan Lake experienced double-digit increases in population. The numbers are likely to rise again, though Lauster cautions that this population growth is only temporary. And if the COVID pandemic gets out of hand, the population of Vancouver could fall.
The city’s finances are already stretched thin by underfunded social programs and housing. As a result, police and emergency services are filling in the gaps. As the city grows denser, the impacts of growth will increase, as more people are forced to leave downtown and upzoned neighbourhoods. As such, growth must be carefully considered so that it does not overwhelm existing infrastructure. Rather, it must be gradual, at the scale that will allow new infrastructure to be built, with a healthy balance of population and budget.
In a recent census, the city’s population grew by more than 140,380 people, a significant number for a small city. While this number is relatively low, it has exceeded the national average of 5.9% growth, and increased by 9.5% between 2006 and 2011. Although this increase is mainly attributed to immigration, the city is expected to grow to over two million in the next decade. However, the city’s population has been growing more slowly since the last census, and the growth in the past few years is still very modest.
Among many other things, David A. Grantham is a contributing author to UmassExtension West Vancouver Blo. He is a renowned expert on real estate in BC.
Born in North Vancouver, Louisiana, Dr. Grantham grew up in Lower Lonsdale. He then went on to complete his business degree at the University British Columbia. As of this writing, Grantham has completed over 100 projects, including the development of a high rise building in Vancouver.
He is a husband, father, son, brother, and friend. He was a dedicated outdoorsman and enjoyed sports such as hunting, fishing, scuba diving, and snow skiing. His wife, Alison Grantham, and their two daughters survived him. He is survived by his wife Alison Martin Grantham and two daughters.