There are many desirable cities in North America where real estate is made expensive because of the imbalance created when demand is far outstripping supply. That is part of what has made the Vancouver real estate market overheated, but there are also additional geographical and situational realities contributing to housing affordability and availability woes for people living in Vancouver. Mountain ranges to the North, Pacific Ocean to the West and the US border to the South means Vancouver cannot expand the same way Toronto has grown outwards over the last few decades.
Then you factor in massive population growth over the last 2+ decades in a city that many would say was overpopulated to begin with. You certainly can’t fault people for wanting to live here with the combination of a good local economy, progressive society, and a climate that is considerably nicer than anywhere else in the country. Estimates are that the population of Vancouver will grow by 68,000 people in 2022 and the existing housing stock is insufficient to both make suitable homes available to buy OR rent. There is a severe lack of affordable rental housing in Vancouver too.
Long story short – Vancouver is a city where many people want to live and it is also one that is quite keen to have newcomers make it a better place, as has always been the case. But all of this contributes to major housing unaffordability. There were 1,002 new housing starts in Vancouver for 2021 – a number that is nowhere even close to meeting the need created by the growing population or people who need housing that suits their growing family. This in a city where the benchmark price for all Vancouver properties rose to $1.25 Million in January 2022.
Daunting to Enter Market
Those who advocate for legislative changes to increase the supply of affordable housing say the issue is most critical at 3 different points:
The costs facing young 1st-time homebuyers who are looking to enter the market at a time in their lives when it is most natural to do so as they establish their lives, careers, and plan for families. For generations it has been the norm to get a condo or some type of smaller housing unit as a means of ‘getting onto the property ladder’. These days the average price for a 1-bedroom condo in Vancouver is just under $575,000, and having 600sq. foot or so units going for over half a million dollars is a daunting prospect for these young people.
The missing middle with housing in Vancouver, which is a lack of homes that fit buyer/renter needs with housing that is somewhere between starter homes and the single family dwelling detached homes that are so prevalent in most neighbourhoods in Vancouver. This is one area where any positive change will have to be legislated, as single-family zoning that applies to 70% of land in Vancouver is why multi-family buildings and social housing cannot be built in the way they need to be if housing is to become more available and affordable for people who need it.
Older homeowners not downsizing the way they have in previous generations due to prohibitively high housing costs making smaller properties less appealing or affordable, and also some retaining ownership of single-family zoned properties longer than they would otherwise because of the rapidly growing equity they have in the home as prices rise meteorically. This means far fewer detached homes being available for young families that need the space as compared to previous generations, and it really does throw a wrench in the natural order of things as far as the property ladder goes.
Raised Interest Rates Not Likely to Change Much
The Bank of Canada is expected to raise interest rates by 6 basis points sometime in Q2 or Q3 this year, but housing industry experts are emphatic in saying this will not promote a sharp correction in housing prices for Vancouver or Toronto. That’s because demand is going to continue to be robust and increase, so anyone looking for a bubble to ‘pop’ and house prices in Vancouver to come down is likely going to be disappointed.
So what can a prospective homebuyer do to be able to afford housing in Vancouver? Some workable suggestions include:
- Being more honest with yourself about what you need, and living in a smaller unit in a multi-family dwelling if that is what you can afford
- Consider purchasing outside of Metro Vancouver in one of the satellite cities of New West, Coquitlam, Richmond, Surrey, or Burnaby. Prices are lower here, although still prohibitively high for a lot of people
- Searching for a more favourable rate for financing your home purchase, and this means speaking with at several mortgage brokers and comparing what each of them is able to offer you through a lender
- Buying a home with friends (non-traditional home ownership) – this is increasingly common where a group of young people will purchase a home together with an eye to having it increase in value down the road. The living arrangements for the co-owners will have to be worked out, but the aim will be to sell it for a profit and increase the chances of the individuals or families then being able to buy a home in Vancouver of their own.