Rising wages, low interest slightly offset high prices
Jim Jamieson
Province
Sharla Miller and Gerrit Keizer with their ‘new’ North Vancouver home yesterday.
Housing affordability across Canada has improved, but you’d never know it from the Greater Vancouver market.
The improvement was driven by faster income growth, slowing house prices, a small decline in mortgage rates and lower utility bills, says a report from RBC Economics released yesterday.
Although the average price of a standard two-storey house in Greater Vancouver increased by 13 per cent year over year, to $578,697 in the fourth quarter of 2006, the RBC forecast calls for single-digit increases in 2007.
That’s cold comfort to Sharla Miller and her fiance Gerrit Keizer, who took possession of their first house a week ago. The 1,200-square-foot, three-bedroom bungalow in North Vancouver’s Norgate neighbourhood cost $522,000.
“It’s scary,” said Miller. “Half a million dollars for a run-down, 57-year-old house. That was the cheapest detached house we could find and we got it for a steal because we bought it at Christmas during the snowstorm when nobody else was looking.”
Miller, 32, a self-employed housekeeper, said she and her fiance — a tugboat captain who previously owned a condo — thought they would be staying in multi-family housing until they found the property. They plan to renovate the house themselves and eventually add a suite.
“In this market, it’s going to be hard for families to live in Vancouver,” she said.
In Greater Vancouver, the percentage of household income needed to service mortgage payments, utilities and property taxes actually improved in the fourth quarter of 2006. For a detached two-storey home, the measure dipped slightly from 74.9 per cent of median family income of about $58,000 in the third quarter to 73.5 in the fourth.
Vancouver’s affordability metrics are in a sharp contrast to other Canadian cities. That same two-storey home requires 48.8 per cent in Toronto, 43.1 per cent in Calgary and 35.2 per cent in Ottawa.
The down-tick in Vancouver is hardly going to trigger a stampede of buyers to the detached-home market, said RBC assistant chief economists Derek Holt.
“In terms of one quarter’s worth of evidence, this isn’t going to make any material difference [in sales],” said Holt. “You almost have to get out the microscope to see the affordability improvements. But our view is this is the start of a trend that will unfold throughout the course of the year and will start to attract first-time buyers.”
The condo and townhouse markets are still looking attractive to Vancouver first-time buyers. A townhouse required 51.6 per cent of household income, while a condo demanded 35.4 per cent.
Holt forecast interest rates to remain flat this year, but didn’t see any slippage in home prices for at least the next three years.
“B.C. is facing more land constraints, some of the longer-term drivers of growth are at least as good as they are in Alberta and you’ve got the Olympics on top of that,” he said.
Kelvin Neufeld, president-elect of the Fraser Valley Real Estate Board and a realtor with Macdonald Realty Olympic, said sales are strong in Surrey and Langley.
“The demand for single-family housing has diminished somewhat, with condos and townhouses increasing,” he said.
“It’s an affordability issue.”
© The Vancouver Province 2007