First-time buyers lower expectations – ranks costliest in nation

Tuesday, November 18th, 2003

First-time buyers lower expectations as province ranks costliest in nation

Adrienne Tanner

Wendy Hansen longed for a garden and her husband Glenn Jorgensen always wanted a dog.

But until recently, the Ladner couple could not afford to buy a house.

“It was out of the question,” said Hansen, 39, an office administrator.

So like many people struggling to buy a home in Canada‘s least affordable housing market, the couple started off with a condominium.

After six years of saving, Hansen and Jorgensen were finally able last week to sell their Steveston apartment and buy their first house.

“It needs major repairs, but it was low enough priced that we’re going to be able to afford the repairs over time,” Hansen said.

British Columbia‘s real- estate market is the least affordable in Canada.

Its top ranking position was cemented last quarter as soaring house prices and slightly higher interest rates pushed B.C.’s housing affordability index rating from 41.2 per cent to 42.2 per cent. That means the average household in B.C. would have to spend 42 per cent of its pre-tax income to own a home, according to an RBC Financial Group study.

In Vancouver, where the average house price is $321,000, the index was higher.

There, home ownership costs, including mortgage payments, taxes and utilities, would eat up 45.3 per cent of the average family income.

“One of the reasons why this index is so high for Vancouver, relative to other places is there is a . . . shortage of single detached bungalows. There’s not a lot of land,” says Carl Gomez, a RBC economist.

Toronto‘s affordability index is lower at 38 per cent due to slightly lower average housing prices ($302,000) and higher average family incomes ($60,000 as compared to $50,000 in Vancouver.)

Most banks will not approve a gross debt-service level of more than 33 per cent, which means in B.C. a house is out of reach for most first-time buyers, says Gomez.

“Looking at these numbers, first-time buyers will probably have to look at something like a one-bedroom condo.”

That is the reality for Jacqueline Connor, 37, who recently bought the Richmond condo previously owned by Hansen and Jorgensen.

“I wanted to get into the market. But I can’t afford a house.”

Connor was living in Vancouver‘s West End and had no plans to leave.

But recently she felt the neighbourhood was starting to slide.

“I have been looking to move because I just don’t feel safe any more. I feel unsafe going into my underground parking in the morning when I’m going to work.”

Despite the high prices, real estate sales are brisk, says Andrew Peck of Royal Pacific Realty Group and first vice-president of the Greater Vancouver Real Estate Board.

People find a way to buy, he said. Some wait to buy their first home. Others have family members able to help with down payments.

New rules that require a minimum down payment of only five per cent have helped, says John McLennan, a realtor with Remax in Vancouver.

Clayton Rocko, 29, and his partner were forced to move when their landlord took advantage of the hot real- estate market and sold.

“It was a little push into the deep end,” Rocko says, describing their decision to buy.

They opted for a new house and a moderate commute.

They recently bought their first home in Port Coquitlam, a do-able drive to their workplaces in North Vancouver and south Burnaby.

“We were having a hard time finding a home in our price range. We had to really look at dollars and cents,” Rocko said.

The couple opted for a new home with a basement suite. Rocko was looking ahead, to a time when interest rates could rise. “Having the rental income is a safety net of sorts.”

© Copyright 2003 The Province


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