Young Vancouverites ‘Straddling the Gap’

Neil Sharma
Mortgage Broker News

In the throes of a full-blown housing crisis, younger Vancouver homebuyers have gotten much-needed reinforcements.

Dr. Paul Kershaw, founder and lead researcher of Generation Squeeze, an advocacy organization for young Canadians, says that with an election looming it’s important to remind policymakers about some of the city’s most vulnerable citizens.

“We continue raising awareness to remind people how big the problem is, and we need to do that because high home prices aren’t uniformly bad or uniformly good,” he said. “For a long time, people were excited about watching home prices rise faster than earnings, because it made people who bought their homes some time ago richer, but they have realized it’s starting to harm their kids.”

In particular, Generation Squeeze is trying to steer the conversation towards a panacea rather than harping on the problem itself.

“Housing prices are rising at an emergency rate if you’re a young person trying to get into the housing market.”

Generation Squeeze has made gains on that front. It pushed for a change to zoning bylaws that allow for more density, which helps housing supply; it has taken on NIMBYs and helped get rental buildings past development hurdles in a bid to tackle low vacancies; and it’s fought against harmful demand.

“We tackled demand-side issues and helped get the foreign buyer tax implemented beyond Vancouver,” said Kershaw. “We also helped get the empty home tax implemented.”

While Generation Squeeze is non-partisan, it certainly has the ear of the NDP-Green coalition governing British Columbia. But the organization has played a role on an even greater stage.

“We got young adults included in the National Housing Strategy as being among the groups most vulnerable in the housing market,” said Kershaw. “The first draft only had one age group, seniors, but 20-25% of them are renters, and that means the other 75% are homeowners and have been for some time. It’s their kids and grandchildren who are vulnerable.”

Generation Squeeze recently released a study called Straddling the Gap, which showed that the average home price in Canada would have to fall to half of its current value—around $223,000—for people aged 25 to 34 to afford an 80% mortgage. They would also need to earn about twice as much as they do now, which is somewhere in the neighbourhood of $93,400.

The study also determined that it takes the average young person 13 years to save for a 20% down payment—significantly longer than it did in 1976, when it took about five years.

“A lot of younger Vancouverites know the housing market is broken and we’re not going to be re-establishing housing affordability for the typical person for a few years—the Canada Mortgage and Housing Corporation puts the timeline at 2030 for all Canadians to afford a home that fits their needs, but they know a lot will be doing it as renters,” said Kershaw.

“The NDP-Green coalition has put out a bolder strategy tackling affordability that’s better in line with research evidence. They need to have the courage to continue being bold, even amidst all the pressure the pressure from the real estate sector.”

Copyright © 2019 Key Media

Luxury condo market may be losing some of its lustre

Joanne Lee-Young
The Province

The glut in Vancouver’s luxury condo market has been getting some attention as their counterparts in London, New York and Sydney have also been losing their lustre.

At the height of the condo frenzy, well-heeled buyers from around the world were snapping up condos in these cities, in part, so they could safely store their wealth. Their eagerness to pay top dollar spurred developers and financiers to plan for more and more of the same product.

Realtor Ian Watt has said that before sales and prices started trending downward in 2018, Vancouver resale condo prices rose an incredible 93 per cent in 36 months.

But by May 2019 the only Downtown Vancouver condos that were moving well, “if the price is right,” were the units priced under $900,000. In that category, 28 per cent of active listings were selling. For downtown condos in the $1.5-million-to-$2.5-million range, only nine per cent of active listings sold. Between $2.5 million and $5 million, just three per cent of those condos moved and for units over $5 million, only one out of 49 active listings sold.

“The luxury market is a long way from finding the bottom,” wrote Watt in an update.

In the presale category, projects have gone from instantly selling out to being cancelled after not being able to hit targets of just 50 per cent of their units sold.

Provincial and municipal taxes targeted at speculators and owners who keep vacant properties, as well as stricter federal mortgage requirements, have significantly dampened what had been an overheated and highly leveraged market.

Now, there is chatter by lawyers who say some owners have been looking for ways to get out of their presale contracts as values drop and they can’t meet financing requirements.

Despite all of these trends, there remains a seemingly alternate universe of luxury projects and high-end highrises that are still being built. These include Westbank’s plans for 10 towers at Oakridge Centre, of which units for the first two towers have been marketed with prices upwards of an eye-watering $4,000 per square foot.

In the West End and downtown of Vancouver there are a few fancy towers designed by “starchitects” that are in the works, including one by N.Y.-based Robert Stern that will have over 450 “luxury residences.” Vancouver-based Landa Global Properties is building that one and also another at 1818 Alberni St.

These billion-dollar projects generally have a planning-to-completion timeline of between five and 10 years before their sales are finalized and the units are move-in ready, and observers say these developers obviously have a feeling that there will, eventually, again be buyers for these projects.

In the meantime, there is also a growing debate going on about what it means to invest in and develop this kind of high-end commodity in many of the cities such as London, N.Y. and Sydney, according to urban planner Andy Yan.

“The world (and Vancouver) seems to be full of Dom Perignon housing, just as everyone else is just looking for a glass of clean water,” he said.

© 2019 Postmedia Network Inc

U-Haul reports more people moved to Toronto in 2018

Steve Randall
REP

There was a 4% increase in migration to Toronto according to a new report.

U-Haul’s annual migration trends report for 2018 shows more people are moving to the city, which remains the top destination for one-way truck rentals by do-it-yourself movers for the third consecutive year.

“Toronto has more than 140 unique neighborhoods, and young people are attracted to that community feel,” stated Antony Grocott, U-Haul Company of Eastern Ontario president. “Companies, including U-Haul, continue to invest in Toronto. There is job growth at all levels.”

The top 5 cities are completed by Calgary Montreal, Edmonton, and Ottawa.

2018 U-Haul Canadian Destination Cities

1. TORONTO

2. CALGARY

3. MONTREAL

4. EDMONTON

5. OTTAWA

6. LONDON

7. VANCOUVER

8. KITCHENER

9. HAMILTON

10. VICTORIA

Rankings are based by the total number of arriving one-way U-Haul trucks into a city in the past calendar year. Destination Cities reflect the volume and regularity of do-it-yourself movers coming into a city, but do not account for departing one-way U-Haul trucks, and thus do not necessarily reflect growth like U-Haul Growth Cities rankings do.

Copyright © 2019 Key Media Pty Ltd

Debt-to-asset ratio of an average household has grown by 4.41%

Ephraim Vecina
Mortgage Broker News

A growing portion of Canadian households are finding it harder to service their assortment of debts, according to new data from Statistics Canada’s latest Survey of Financial Security.

Among those who hold debts, around 11% missed or paid late their non-mortgage bills in 2018. Meanwhile, among those with just mortgages, approximately 4% skipped or delayed their payments.

Measuring in terms of debt-to-asset ratios, StatsCan numbers covering Q4 2016 showed that around 7% of households with a DTA of less than 25% had late or missed payments. For those with a DTA between 25% and 50%, around 11.5% had delayed debt servicing.

The ones that struggled the most in the last quarter of 2016 were those with a DTA greater than 50%; among these households, 16.1% struggled with servicing debts on time. And the budget tightness implied by these findings has only intensified, as the debt-to-asset ratio of an average household has grown by 4.41% since then.

“Canadians are falling behind on bills, and it gets worse as they assume more debt,” Better Dwelling explained in its analysis of the figures. “People are shifting their debts around, but not actually making much progress.”

Recent employment figures might offer a sliver of hope, however, with Canadian markets likely to expect stronger consumer purchasing power.

Unemployment reached a record 5.6% in May, the lowest reading by StatsCan since 1976. The same month also saw the addition of 27,700 new employees nationwide, bringing the 12-month total increase ending May to 453,100.

Said gains represented a 2.4% year-over-year increase, which was the largest annual growth since before the recession a decade ago. Over the last two years, almost 700,000 new jobs have been added to the economy, largely due to the influence of service-related industries such as technology and transportation.

StatsCan noted added that these trends will feed into greater stability in the housing and export sectors, as well as much improved pace in the national economy’s growth. Experts’ estimates put growth at over 2% on an annualized basis in Q2 2019.

Copyright © 2019 Key Media

One in thirteen families can buy a home

Neil Sharma
Mortgage Broker News

With the mortgage stress test, only one in 13 Vancouver families can afford to buy a home.

“Only one in eight families earns the income necessary to manage ownership costs in the Vancouver area, and one in five families in the Toronto area and Victoria. And this isn’t taking into account the mortgage stress test,” said RBC’s report on Housing Trends and Affordability. “Clearing a higher qualifying rate would drop even more families out of contention (to one in 13 in Vancouver, and one in seven in Toronto).”

The news is slightly better for condo buyers, though.

“Buying a more affordable condo apartment opens the field to two-thirds of families in most markets,” continued the report. “But still just one-quarter of them would be able to cover condo-ownership costs in Vancouver and only one-third in Toronto. Severe affordability issues remain a major obstacle for all but the wealthiest in Vancouver, Toronto and Victoria.”

The report otherwise noted housing affordability in Canada improved for the second straight quarter, albeit nominally. It declined 0.3% to 51.4% during Q1-2019, yet remains an historical high. Thanks to declining prices in Western and parts of Atlantic Canada, as well as a boost to household income, housing is technically more affordable than it was in Q3-2018.

But that’s little solace for homebuyers in Vancouver, Toronto and Victoria, and housing markets in Montreal and Ottawa are beginning to show signs of stress, too.

While the signs of fledging affordability are negligible at this point, RBC forecasts a drop in ownership costs because interest rates aren’t likely to rise. Buyers in Western Canada will have an opportunity to capitalize because housing prices are under pressure from above.

“A majority, or near majority, of families would be able to cover the cost of owning an average home in nine of the 14 markets we track,” said the report. “The proportion of ownership-capable families is highest in Canada’s most affordable markets—St John, St. John’s, Regina, Quebec City and Halifax. It’s a very different story for a trio of least-affordable markets. Only one in eight families earns the income necessary to manage ownership costs in the Vancouver area, and one in five families in the Toronto area and Victoria. And this isn’t taking into account the mortgage stress test.”

Copyright © 2019 Key Media