Vancouver homes least affordable, another study finds

Thursday, March 30th, 2006

Housing’s share of pretax income highest in decade

Ian Austin and John Colebourn

Vancouverites spend more on housing than anyone else in Canada.

A new RBC Economics study found that the city’s residents spend an average of 57.5 per cent of their pretax household income to purchase a detached bungalow.

That number — the highest in a decade — far outweighs other cities across Canada.

In Toronto, the second-most expensive city, residents spend 42.7 per cent of their gross income on detached housing, followed by 35.6 per cent in Calgary, 34.1 per cent in Montreal and 33.1 per cent in Ottawa.

In her 18 years of selling real estate, Vancouver realtor Brenda Boyle has seen the market through good and bad times.

Right now, she wonders where the red-hot market is going in Vancouver and who really will be able to afford a home, as prices continue to be unrealistic for many average wage-earners and first-time buyers.

“Homes have gone up drastically in the last two years, and it’s driving everybody out of the city,” said Boyle, who works for Coldwell Banker Premier in Vancouver’s West End.

“The prices people are getting continue to astound me,” she said. “Is it going to end?”

Those who can afford a down payment, she noted, often have the help of family.

“I think it is the baby boomer generation encouraging their kids to get into the real-estate market,” she said.

Paul Fenney, a mortgage broker with Home Loans Canada, calls the market “crazy right now.”

Fenney said high real-estate prices have some of his clients “unable to buy where they want to live.”

“The complaint I hear from people is they can’t purchase the home they want,” he said. “It’s outside their qualifying budget.”

And if people are just scraping by now with big mortgages, Fenney warned that there could be a big reality check in the coming years as they go to renew and rates are higher, as economists predict.

“Five years down the road when their mortgages come up for renewal and the rates are significantly higher and their incomes have gone up only modestly, people are going to be very stressed,” said Fenney.

At the Urban Futures Institute, executive director David Baxter said people who buy in the Lower Mainland are getting much more than just a home.

“In buying a home in the Vancouver area, part of what you’re buying into is much better job and income prospects,” he said. “The lifestyle and quality of life are in that [home] value.”

The B.C. picture is no more encouraging, said RBC.

“The two-storey home took up 62.8 per cent of a typical household’s pre-tax income in the final quarter of 2005, costing a whopping $435,000,” RBC reported.

“The closest runner-up was Ontario, where two-storey homes cost $325,000.”

RBC sees no break in B.C. prices: “The significant deterioration in affordability is expected to continue as the economy continues to boom and strong migration to the province persists. Land shortages coupled with labour and capacity constraints will intensify demand for homes and [are] expected to continue to drive rapid price appreciation across the province.”

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