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.
Parts of Richmond are a short walk to the Canada Line – but most of it is not like that at all. There is only one bus route that meets Translink’s “frequent service” criterion (#410). Condos near rapid transit stations seem to be selling. Elsewhere, the market has stalled. Prices probably would have dropped further and faster, if there were more activity. Right now offers are not being made, there is more property on the market than buyers – and most of the “buyers” are just curious, not people needing a different home to the one they have. The only possible response is that houses for sale are being taken off the market.
The one single event that seems to have triggered this sudden reversal in behaviour is the change in mortgage rules. The expectation is that prices will drop – which means buyers are waiting for them to drop further. Anything that looks like a bargain today will become an even better bargain tomorrow. The effect is most noticeable for family homes (townhouses) in areas distant from the city centre. These houses were never the target for off shore investors since many strata councils forbid rentals – a rule which was created to protect house prices but now actually ruins them.
Thanks for that comment. I gather that you’re expecting further price depreciation across most of the region and across different classes of residential property in the near term.
I stayed to the market for detached homes in this post, partly because the $2 million figure for Vancouver West is frequently reported across Canada as a spectacular example of home price inflation in this region. The reported pattern for townhouses is less spectacular, but is broadly similar to that for detached homes, with Mission and Maple Ridge doing badly over five years and Vancouver City (and Richmond) slightly ahead of the game. Surrey is an anomaly, with an apparently strong market for detached homes and weakness in the townhouse market. The condo apartment market shows weakness across the region over the past five years, to the point where I have trouble understanding the numbers (a 17.6% drop in South Surrey/White Rock?), and more weakness is forecast as many new units come on stream.
Yes and for two reasons. I suspect that the volume of sales in any market is numerically more significant at the lower price ranges than the upper. $2m makes a for a gripping headline, but is not what most people live in. And I happen to have first person experience of trying to sell a strata title townhouse remote from the Canada Line.