Sales were up in all types of housing in August, according to the Real Estate Board of Greater Vancouver

Tiffany Crawford
The Province

Home sales in Metro Vancouver were slightly up this summer compared with last year, according to the Real Estate Board of Greater Vancouver.

There were 2,231 residential properties sold in August, a 15.7-per-cent increase over the same month last year, the board said in a report posted Wednesday.

Sales were up across all types of homes including detached, townhouses, and apartments. The jump followed a fairly strong July as well, when 2,557 homes were sold in the region.

Last month’s sales were 9.2 per cent below the 10-year August sales average, putting sales at more normal summer levels for Metro Vancouver, said board president Ashley Smith.

There were 3,747 detached, attached and condos listed for sale on the Multiple Listing Service in Metro Vancouver last month, which the board said represents a 3.5-per-cent decrease year over year, and an 18.8-per-cent decrease compared to July when 4,613 homes were listed.

Smith says with more demand from home buyers, the supply isn’t accumulating like earlier in the year.

“These changes are creating more balanced market conditions,” Smith said in a news release.

The composite benchmark price for all residential properties continued to slide, however. For all properties the average price in August was $993,300, an 8.3-per-cent decrease over the same month last year and a 0.2-per-cent decrease compared to July.

The benchmark price for detached homes was down by 9.8 per cent to $1,406,700.

Condo benchmark prices decreased 8.9 per cent in August to $771,000, while the benchmark price of attached homes across the region went down 7.8 per cent to $654,000.

© 2019 Postmedia Network Inc.

Landlords remain limited to provincial rate of inflation when raising rents

Western Investor

Following last year’s rent-increase-cap announcement, the B.C. government has now set the rate that landlords can hike rents in 2020 at 2.6 per cent.

The new rate is the province’s revised annual rate of inflation, and is two per cent lower than it would have been prior to the rent-hike cap announced in September 2018. Prior to that, the rent-increase cap was inflation plus two per cent, which in 2018 totalled 4.5 per cent.

“Renters need secure housing they can afford,” stated housing minister Selina Robinson. “That’s why we removed the additional two per cent above inflation that the old government allowed for rent increases since 2004. Under the old formula, renters would have seen a rent hike of more than nine per cent over 2019 and 2020. Because of our changes and the removal of the fixed-term loophole, people will no longer face the unreasonable rent hikes that were allowed for years.”

Landlords renting out a $1,250 per month apartment (the average rent in B.C.) will be able to increase the rent by $300 less next year, compared with the previous rules.

David Hutniak, CEO of LandlordBC, said in September 2018 that the reduction in allowable rent increases presented several problems, including making construction of purpose-built rental buildings much less financially viable for developers. LandlordBC also issued a statement saying that, even at 4.5 per cent, the rent increase may not be enough to cover the increased costs landlords face in renting one or more suites.

Copyright © Western Investor

Where low-rise housing is in high demand and short supply, even size-adjusted prices can climb and approach those of high-rises

Murtaza Haider and Stephen Moranis
The Vancouver Sun

Housing is a heterogeneous good. Diversity in age, location, quality, size and type makes comparisons difficult.

Despite these differences, average housing prices are often used to compare housing across jurisdictions or typologies. Hidden in the average price, however, are diverse attributes that can paint a different picture if one accounts for them.

Size, like location, is one of the primary determinants of value. But most comparisons of housing prices do not control for size by divulging price per unit of space.

That bigger homes sell for more than smaller homes, everything else being equal, seems obvious. That single-family dwellings, which are generally much larger than condominiums, also carry higher average price tags, also makes sense. But when comparing homes and condominiums, the latter of which are usually built in areas where land values are higher, on a per-square-foot basis, the relationship between size and price becomes more complex.

A recent report from Royal LePage took a closer look at that relationship. The comparative analysis revealed that when one controls for dwelling size, single-family detached (SFD) housing prices in Toronto, Vancouver, and Calgary approached, and in the case of Vancouver surpassed, those of condominiums.

The high size-adjusted price of SFD housing provides new fodder for urban economic theory. One of the axioms of urban economics is that prices adjust to achieve locational equilibrium. If the size-adjusted price of condominiums is comparable to the size-adjusted price of SFD housing, which is usually built where land is cheaper, should one assume that intra-urban variation in location no longer matters?

Royal LePage’s brief tabulated the size and the size-adjusted price of dwellings sold between January and July of 2019 in large housing markets in Canada. The report found, as one would expect, that on a per-square-foot (SFT) basis, condominiums still cost more than SFD housing.

There was, however, one apparent exemption. In the City of Vancouver, the median price of SFD housing on a per-SFT basis was higher than that of condominiums.

The findings raise an interesting question: Do size-adjusted prices in Vancouver contradict the tenets of urban economic theory?

The answer to the riddle, at least partially, lies in housing supply. In markets where low-rise housing is in high demand and short supply, even size-adjusted prices can climb and approach those of high-rise dwellings.

Consider the City of Vancouver where, according to the 2016 Census, two high-rise apartments (not necessarily condominiums) existed for every single-detached house. In fact, the Census recorded only 41,305 single-detached houses in the City of Vancouver. With such a small stock and an unmet global demand for housing in Vancouver, the price of SFD housing, even when controlled for size, is expected to escalate.

The City of Toronto is not much different. The limited supply of low-rise housing, especially the SFD dwellings, is likely the reason for high SFD housing prices.

The 2016 Census reported 83 per cent more high-rise apartments than single-detached homes in Toronto. The Royal LePage report picked up on the supply-side dynamics and revealed that the median per SFT price of condominiums in Toronto was a mere 12 per cent higher than the same for SFD housing.

The price dynamics differ for the greater Toronto area (GTA) where the abundance of developable land moderates land prices, which is subsequently reflected in dwelling prices and sizes. Whereas the median size of an SFD house in the City of Toronto is twice the size of a typical condominium, a standard SFD unit in the GTA is 2.5 times larger than a regular condominium.

The difference in land values is also evident in the difference in size-adjusted prices. Unlike the City of Toronto where the median price of a condominium is only 12 per cent higher than that of an SFD dwelling, condominium prices in the GTA on a per SFT basis, are 53 per cent higher than those of SFD dwellings.

Price of a commodity is influenced by its demand and supply. Recent data for median housing prices suggests that in markets where SFD housing is in short supply and high demand, size-adjusted prices of low-rise housing can approach those of high-rise dwellings.

© 2019 Financial Post

The first-time home buyer incentive falls short for Vancouver buyers

Steve Randall
Canadian Real Estate Wealth

As Canadians enjoyed the Labour Day holiday, a new government scheme was officially launched that aims to help more people get on the housing ladder.

But the First-Time Home Buyer Incentive may not be the panacea for potential new entrants into Canada’s housing market that Justin Trudeau and his ministers hope.

Critics say that it will not make a widespread difference to the ability of first-time homebuyers to afford to follow their homeownership dreams.

With the program’s requirements for household earnings of a maximum $120,000 and a mortgage-to-income ratio capped at 4 times household income, the top-end of the homes that the scheme will help to buy is far short of the $826K average home price in Vancouver or $982K in Toronto.

“It’s a very narrowly-focused program,” Royal LePage President Phil Soper told Bloomberg. “It’s just not a big enough slot of the market to move it.”

100K borrowers or 5K?

CMHC, which is administering the program, estimates that it could help 100,000 first-time homebuyers but Mortgage Professionals Canada thinks the figure could be as low as 5,000 as potential buyers are dissuaded by giving up equity in their new home and mortgage insurance requirements.

“The government says it wants to make homeownership more affordable and accessible, but its actions say otherwise,” MPC chief economist Will Dunning told Bloomberg. “The proposals “to improve access are likely to have only small positive effects.”

Copyright © 2019 Key Media Pty Ltd

Pre-sale units fewer this year due to late or cancelled developments

Ephraim Vecina
Mortgage Broker News

Launches of pre-sales in the Greater Vancouver region have seen a drastic decline over the past year, as developers are reacting to sluggish absorption rates by deferring the release of new supply.

Data from MLA Canada showed that the market saw its lowest number of pre-sale units inaugurated in recent memory, falling by 91.82% annually in July. The volume was 43.07% lower than experts’ forecasts.

This came amid a throng of late or cancelled developments – a trend also indicated by the latest CMHC numbers.

Last month, Vancouver housing starts suffered a dramatic 23% annual drop. This is in stark contrast to Toronto (a mere 5% shrinkage) and the overall average (down 9.6%), for a total of 222,013 units nationwide in July.

By asset class, urban multi-family housing experienced a 12% year-over-year decline to 162,722 units. During the same time frame, urban single-family detached homes fell by 4.6% to 46,400 units.

The transaction volume of newly launched pre-sales had a much worse decline, at 95.34% annually. This translated to merely 58 pre-sale units sold last month.

“Even with the throttling of units, this isn’t a big number for sales. This was the fewest pre-sale launch sales for any month, in at least two years,” Better Dwelling noted in its analysis of the data.

The considerably lower number of launches has improved Greater Vancouver’s sales-to-new-listings ratio, from 43.07% in July 2018 to 37% last month.

Copyright © 2019 Key Media

The government’s First-Time Home Buyer Incentive (FTHBI) comes into effect today

Sarah Turnbull
other

The program, aimed at making it easier for young people to buy their first home by lowering new buyers’ monthly mortgage payments.

According to the program, which was introduced by the Liberals in their 2019 budget, the federal government will absorb five per cent of monthly mortgage payments on existing homes and 10 per cent on new builds.

But there are a few notable conditions to watch out for, which have come under fire since the plan’s March announcement. Ottawa-based mortgage broker Frank Napolitano spoke with CTVNews.ca to help lay it all out.

First off, to be considered eligible, applicants must not have owned a house in the last four years – exceptions will be made for those in a “breakdown of marriage or common-law partnership.”

Secondly, a homebuyers’ combined annual household income must be lower than $120,000 before taxes and deductions. As Napolitano says, that qualifier strikes out most residents from Vancouver and the Greater Toronto Area.

“The max income is $120,000 that can be used for this program, therefore to qualify for a mortgage – if you have no debt – it’s typically four, maybe four and a quarter times your annual gross income so there’s not a lot of properties in the $500,000 range or less. Maximum property value under this program would be $560,000.”

To that end, the FTHBI is more likely to benefit residents in less crowded markets, like smaller urban centres in Ontario, Quebec, the Prairies, or out east where you can still find a home below the price cap.

Additionally, as Napolitano points out, first-time buyers will still have to cough up default insurance under the plan.

“We’ve had customers call us and say ‘we’ll put the 10 per cent down and then we’ll buy a new build and the government will give us 10 per cent so we don’t have to pay default insurance.’ False. Regardless of the down payment, this program only works if you have default insurance.”

Default insurance protects financial institutions from default – the premium gets tacked on to your mortgage payments.

There are obvious paybacks for the government. While they provide an interest-free loan, they also secure shared equity in your home as it goes through gains and losses. This means the amount paid back to the government will fluctuate based on how much your home increases or decreases in value.

The loan must also be paid back under three circumstances:

• If you re-finance your home;
• if you sell your home;
• or at the end of 25 years.

Minister of Families and Social Development Jean-Yves Duclos – who also oversees the Canada Mortgage and Housing Corporation – is responsible for the rollout of the program. In an announcement last Wednesday to informally launch the FTHBI, the minister touted the program for empowering the middle class.

“Thanks to mortgage payments that are more affordable, many families will have hundreds of dollars more each month in their pockets – money to spend on things like healthy food, sports activities for their kids, or even save for the future,” said Duclos in the statement.

The program is expected to serve about 100,000 Canadian homebuyers. Follow the chart below to determine whether you should.

© 2019 BellMedia