Home prices have sagged across Fraseropolis in recent months, but they’re still something of a marvel. Realtors estimate the “benchmark” cost of a detached house in north Burnaby at close to $1,000,000; west of Ontario Street in Vancouver, the figure last month was above $2,000,000.
So, inevitably: is there a residential real estate bubble in British Columbia’s Lower Mainland? Are we verging on a crash? Is it time to panic? This debate has run on for years, and I won’t issue a ruling here, except to observe that the pricey parts of the region have tended to get pricier over time, despite the fretting, while home prices in the least expensive areas have stagnated (see the chart at the bottom of this post.)
Home prices on the Canadian west coast remained relatively stable through the economic downturn of 2008, while those south of the border took a dive. U.S. prices are now recovering, with values in high-end communities rising at least as quickly as the those in more modest areas, albeit with some contrary local trends. Zillow, a site that provides data down to the postal code level [this service was discontinued in 2014], judges that U.S.-wide, the value of a detached home rose 5.1% year over year to November 2012. The Zillow index for San Francisco, a very expensive market in U.S. terms ($760,800), was up 15.5%; in most of the million-dollar-plus parts of San Francisco, the index jumped by more than 20%. Values in Capitol Hill (Seattle) and Alameda (Portland) rose more quickly than the local averages. In Palo Alto (Santa Clara County, aka Silicon Valley) they rose by 22% year over year to $1.62 million; in Beverly Hills (Los Angeles County) they rose by 9% to $2.979 million. There doesn’t appear to be any force of gravity pulling these prices down to a national mean.
In the most affluent parts of Greater Vancouver — west side Vancouver, Richmond, and the City of West Vancouver — the residential real estate trend in the past six months is sharply down, although values are still well above those of five years ago. What has driven prices so high in these areas? An influx of speculative money from China is often named as a primary cause; we might also guess that inheritance money, drug money, proceeds from local real estate flipping and venture capital windfalls are significant factors. Perhaps the flow from China is tapering off; perhaps speculative interest in general is shifting to Calgary, Toronto or the U.S.
Clinging to my own bias, however, I would suggest that there is a high value in living in a neighbourhood where residents can enjoy a short commute to work and access to true city life. These conditions apply in all of the City of Vancouver, and increasingly in Richmond and Burnaby. The next six months may tell us something more about how much these lifestyle advantages count in the marketplace.
The short commute is a rarer privilege in Maple Ridge, Mission, and Langley, especially for managers and professionals; home prices in those suburbs are lower, and have moved sideways for years. Ladner (in south Delta) may be joining this club, although the weather is better. Surrey, with the biggest short-term price gains for detached homes, is quickly evolving a bigger, more complex local economy, with more high-paying jobs and a serious ambition to create a city centre that will rival Vancouver’s.
The chart above shows benchmark prices for detached homes in November 2012 as reported by the Greater Vancouver Real Estate Board and the Fraser Valley Real Estate Board. Communities or areas are ranked by their performance over the past six months. In the Fraseropolis tradition, boundaries have been drawn in an ad hoc way; the GVREB covers part of Greater (Metro) Vancouver plus Howe Sound and the Sunshine Coast, while the FVREB covers the rest of Greater Vancouver plus a part of the Fraser Valley. The “Lower Mainland” row in the chart combines the service areas of the two boards. Some rows and some columns from the original charts have been dropped for brevity. To see estimated values for townhomes and apartments, follow the links to the real estate board charts.
The boards have derived their figures from the MLS Home Price Index, a tool that indicates trends across Canada.
I’ve avoided putting a positive spin on home price increases. I’m a homeowner, and would like to see my own home increase in value. At the same time, I see that the shortage of afforable housing in the region has serious adverse effects for individuals and the wider community.