Scorching Vancouver house prices put pressure on politicians

theglobeandmail.com
June 8, 2015
By Brent Jang

The average price for detached homes within the city of Vancouver has rocketed to a record $2.23-million as the provincial government faces pressure to cool off the scorching housing market.

Prices for those coveted properties in Vancouver proper have surged amid low interest rates, limited listings and an influx of international buyers in a seller’s market. Industry observers say buyers with ties to China have been especially keen on high-end houses, though the broader impact of offshore buyers is unclear because of a lack of data.

The record monthly average price of $2.23-million in Vancouver for existing single-family detached homes sold in May is a 19.2-per-cent jump from $1.87-million in the same month last year, according to new statistics obtained by The Globe and Mail from the Real Estate Board of Greater Vancouver.

In its monthly release of statistics, the board provides the average detached price for Greater Vancouver, which includes most suburbs, but doesn’t disclose the average for the city itself.

Last week, B.C. Premier Christy Clark dismissed a proposal by Vancouver Mayor Gregor Robertson, who called for the province to introduce a speculation tax on house-flippers. She also rejected his suggestion to selectively hike British Columbia’s property transfer tax to target high-end transactions.

In his May 22 letter to Ms. Clark that was publicly released last week, even Mr. Robertson vastly underestimates how expensive detached homes have become within city limits.

A recent Vancouver City Savings Credit Union study predicts that in 2030, the average price for all housing types within Vancouver could exceed $2.1-million, with detached properties forecast to soar to an average of $4.4-million.

Ms. Clark said it doesn’t make sense to clamp down on foreign investors. “Experts estimate that local investors are 3 to 4 times more active in the region’s housing market than foreign investors,” she wrote in a letter dated June 4 to Mr. Robertson. “Using any method of new taxation with the goal of driving down the price of housing could have the unintended effect of hurting current homeowners across the region.”

The Premier’s letter is accompanied by a 10-page analysis from British Columbia’s Finance Ministry. “A tax on foreign buyers would not address the long-term issue of a limited supply of land servicing an ever-growing population in Greater Vancouver,” the ministry said in its analysis.

The Real Estate Board of Greater Vancouver, which encompasses Vancouver and suburbs such as Richmond and Burnaby, is concerned that too much attention is being placed on detached properties within Vancouver proper.

In the 12 months ended May 31 this year, Vancouver detached houses sold on the Multiple Listing Service averaged $2.02-million, or a 10.5-per-cent increase over the previous 12-month period, according to the board.

But board president Darcy McLeod said that of total sales for detached homes, condos and townhouses last year in Greater Vancouver, almost 70 per cent were less than $800,000.

The board said last week that the average price for detached homes sold in Greater Vancouver reached a record $1.42-million last month, or a leap of 16.3 per cent from May, 2014.

In recent years, the region’s housing industry has concentrated on its own statistic, called the Home Price Index (HPI), arguing that averages skew the picture because the most expensive properties are included. The benchmark HPI is a representation of the typical house in an area, providing a better barometer of real estate trends than average prices, according to housing officials.

The board, whose monthly data provides the HPI for Vancouver’s west side and east side, told The Globe on Friday that last month’s HPI for detached properties within Vancouver city limits set a new high of $1.69-million, up 16.4 per cent from $1.45-million a year earlier.

When looking at Metro Vancouver - a broader area that includes Greater Vancouver and suburbs such as Surrey and Langley - prospective buyers will find a range of affordable, multifamily housing options, according to the B.C. Real Estate Association.

While solid numbers aren’t available for foreign investment in the housing market, association chief economist Cameron Muir estimates offshore buyers account for less than 5 per cent of sales of detached homes, condos and townhouses in Metro Vancouver.

The top 10 detached transactions last month - all on Vancouver’s west side - had selling prices that ranged from $6.1-million to $13.3-million, according to data on the Multiple Listing Service. The lowest detached price last month in the bottom 10 was $682,000, but that was due to the property having development restrictions. The other nine in the bottom 10 - all on Vancouver’s east side - sold for prices from $799,000 to $925,000.

Calls for a provincial speculation tax on housing have drawn mixed reviews.

“The notion that people shouldn’t be flipping properties is a legitimate issue,” said Paul Kershaw, founder of Generation Squeeze, a lobby group formed to represent the views of Canadians in their 40s and younger.

But Ken Wong, an agent with Royal Pacific Realty Group, said his sampling of more than 500 recent sales of detached Vancouver houses shows less than 5 per cent were flipped within one year.