What Experts Think About Vancouver's Affordability- October 4, 2013
Taken from the Real Estate Board of Greater Vancouver's "The Open House"
Is Vancouver's affordability a problem? And if it is, are there solutions? The UBC Centre for Urban Economics and Real Estate decided to find out by hosting a panel of four experts on the subject.
Panel members agreed that Vancouver now ranks as the second most unaffordable city on earth, just aftter Hong Kong and well ahead of London (seventh place), and New York (12th place), according to the 2013 Demographis International Housing Survey.
Given the wide-ranging concerns this topic generates, it's no surprise that September 17, 2013 session was standing-room only.
HIghlights of what the experts had to say:
Tsur Somerville, Real Estate Foundation of BC Professor in Real Estate Finance, and Director, UBC Centre of Urban Economics and Real Estate, Sauder School of Business
"The idea that affordability has suddenly worsented is not new. Its been around since the 1980's" said Sommerville.
"But rather than it being a housing issue, it's more of an income issue," explained Somerville, noting that median incomes are lower in Vancouver than in Regina or Saskatoon--which are far more affordable cities.
Why is Vancouver so popular despite high housing price?" Vancouver is a high-amenity city," explained Somerville. It's attractive to college graduates and higher-income earners who are prepared to pay for amenities because they get significant value in return. "This process, known as income sorting, drives up rents and housing costs," says Sommerville.
Robert Helsley, Dean, UBC Sauder School of Business
"In Vancouver, the ratio of a median house price to income is now eight," explained Helsely. "This means the median price of a home is more than eight times the median household income."
Is that too high?--" Housing prices are deteremined by a process of idding. Housings costs are higher in Vancouer because people want to live here for the high qualify of life and are prepared to pay for it," said Helsely.
Helselsy noted that some of the most affordable housing is located in Detroit, but with few amenities, not many people want to lie there any more.
" We have nothing to fear from density. It doesn't destroy surrounding neighbourhoods. It helps preserve them." Michael Goldberg, Professor and Dean Emiritus, UBC Sauder School of Business
Michael Goldberg, Professor and Dean Emeritus , UBC School of Business
Is housing affordable? "Yes and no," said Goldberg. "Remember that half of all sales are below the median price."
What can we do? Slow demand? Stop migration? Raise taxes? Stop mortgage lending?
Plan B, according to Goldberg, would include cutting approval times, rezoning land in advance, and fixing costs such as development cost charges.
Stanley Hamilton, Emeritus Professor, UBC Sauder School of Business
When Hamilton moved to Vancouver in the 1960s, his professor's salary didn't qualify him for a mortgage because his annual housing costs would have been more than 32% of his total household income.
"The bank wasn't going to change their rules for me, so we sold our car and our couch to increase our down payment."
Hamilton thinks its time to reconsider the 32% rule.
What role do foreign investors play in driving high housing prices?
"Is Vancouver becoming a vacation city like Aspen, where homes sit vacant for much of the year? asked Hamilton. "In Dunbar, many of my retiree neighbours head to Palm Springs for in the winter. Is this any different?
"Foreign ownership is not a problem, it's a solution, " explained Dr. Goldberg. "We are a diverse city and we welcome immigration.
Goldberg sees a key solution as higher density and height along major streets and transit corridors and in commercial zones.
"Density stabilizes neighbourhoods by letting residents such as empty-nesters, stay in their homes or neighbourhoods as they age and their housing needs change."
At the same time density helps preserve the character of the interior of the neighbourhoods. "Looka at Kerrisdale and the Arbutus and West 12th Avenue neighbourhoods, which have benefitted from density. Also look at the Coal Harbour and Yaletown neighbourhoods."
To read the Demographia study, go to: www.demographic.com/dhi.pdf
Another solution, in my humble opion....
I believe that RRSP used for a down payment of a first home should not have to be repaid if you are buying your primary residence.
At the moment, you can borrow from your own RRSP funds but it is repayable up to fifteen years. According to a February 2014 Sun Life report, 24% of Canadians, when they retire will be using their primary home as a source of income. If this is the case, their RRSP funds to help purchase their first home would come to fruition here. In addition, the threshold sould be as much as possible.