Unaffordable homeownership isn’t the only pitfall
Young would-be homeowners are feeling the chill. For more than half a decade, these potential property-owners and family-makers have been frozen out of the city of Vancouver. But that freeze due to unaffordable housing doesn’t stop at Boundary Road. Homebuyers are struggling to find affordable housing on the North Shore, in Richmond, in Burnaby even as far as Langley.
In my last post, I highlight eight distinct factors that have helped push housing prices up in metro Vancouver and across the lower mainland. But unaffordable homeownership isn’t the only casualty. Here are four additional fallouts from Vancouver’s messed up real estate market.
Fallout #1: You lose your deposit money!
In the last 12 months, the average cost of a single-family detached home, in Vancouver, jumped past the $1 million mark. Yes. I said average and $1 million in the same sentence. Mind-boggling, I know. Meanwhile the median incomes for Vancouverites have barely budged in the last few decades. Yet, this disparity in earning growth and the price of housing has done little to temper the pace of real estate transactions in this west coast city. Instead, it may have led to a increased sense of urgency for would-be homebuyers. This urgency has led to practices that have led some realtors and brokerages to voice concern over risks caused by fast deals and on-the-spot million dollar decisions. (Remember, despite all the media reports, the vast number of agents really do work hard for their clients.)
The biggest concern is that buyers have started to eliminate certain clauses that were once used to protect their own interests—such as choosing to waive the financing clause and the home inspection clause. These conditions were once commonplace in Vancouver real estate transactions, but Polly Cordwell, managing broker for Sotheby’s in Vancouver, says that virtually 100% of the buyer offers that are coming in these days have absolutely no conditions or clauses. “I get concerned that the bank will say, ‘I’m sorry, we’re not going to appraise the property for that price,’” said Cordwell during a recentGlobe and Mail interview. When a buyer can’t get full financing, they risk losing their substantial deposit, or being sued by the seller for breach of contract. Big ramifications on a big financial decision.
To make buyers more aware of the dangers, Cordwell helped draft a new form that Sotheby’s agents must now ask clients to sign; it spells out that the buyers understand the risks when an offer is made with no conditions. Sotheby’s isn’t the only shop in town to start down this road. Mortgage brokers in B.C. are also starting to consider acknowledgement forms for clients who opt for subject-free offers.
Fallout #2: Abandoned streets
Then there’s the abandoned houses. Dilapidated homes beautifully captured in the haunting documentary made by a Vancouver filmmaker. It’s a stark reminder that in this West-coast city, houses are the core of community—and nothing erodes community faster than an unoccupied home.
But crumbling homes aren’t the only abandoned properties in Vancouver. One urban planner, Andy Yan, who has now become the go-to person on housing affordability and empty condos, analyzed data on Vancouver’s condo towers. He believes that roughly 15% of the city’s downtown condos are either empty or occupied by non-permanent residents. This lack of use means these condo communities fail to inspire a vibrant community feel and this translates into underwhelming success for local businesses.Vancouver radio station News 1130 confirmed these observations in a recent broadcast, when the it stated that “there are also plenty of empty storefronts along otherwise bustling corridors.”
Yan highlights the empty streets around the luxury towers of Coal Harbour, where one in four condos are non-resident occupied, as an illustration of Vancouver’s abandoned homes problem. It feels like a resort town, suggests Yan, a place like Whistler that caters to visitors not residents. By developing into a “resort economy,” the city stops supporting the needs of owner-occupied homes and caters, instead, to property owners who don’t live in the homes or even in the area. This creates a sense of rootlessness, Yan told the Vancouver Sun, in which many of those who work and want to raise families end up moving out of the city.
One of the few Canadian researchers doing work similar to Yan is University of B.C. geographer Dan Hiebert. Hiebert recently projected that by 2031, only one out of four metro Vancouver residents will have grandparents born in Canada. Already only a third of residents in Vancouver, Richmond and Burnaby were born in British Columbia; the rest are from a multitude of homelands from across the country and the world. Compare this to New York City where half the residents were born in New York state. Or to the highly migrant population of Los Angeles, where almost half (42%) of residents were born in California. Or Montreal, also a magnet for immigrants, a city that boasts two-thirds of residents born in Quebec.
Fallout #3: It’s just as hard to find a rental
One obvious solution to housing unaffordability is to rent. Only, it’s not a feasible solution in metro Vancouver (and quite possibly in most of the lower mainland and across the Lion’s Gate Bridge to the North Shore). Again, Yan analyzed the data. What he discovered was that 50% to 60% of downtown condos are not inhabited by their owners, they’re owned by investors and many are rented out. This would be good, says Yan, considering how tight Vancouver’s rental markets are, but these urban condo rentals are just not affordable for most. This means finding an affordable rental unit can be virtually impossible, particularly if you’re a family with kids.
Fallout #4: No more good, local food
The last fallout is the most tenuous and obscure: the loss of good, fertile growing grounds in B.C.
While it’s hard to see the direct impact rising house prices has on farmland, the correlation between the two events is hard to deny. So, Vancity, a vocal credit union that operates in Vancouver and the lower mainland, explored the topic. The result was a compelling report released on April 7.
The Vancity report shows how farmland prices in metro Vancouver now sell between $150,000 to $350,000; land prices in the rich and productive soils of the Fraser River delta have risen and now sell in the range of $80,000 to $110,000 per acre. While prices can drop for parcels of land greater than five acres, these price increases are setting off alarm bells, especially when paired with statistics from agricultural lender Farm Credit Canada that show that any land priced above $80,000 per acre makes farming unsustainable.
Wait. It gets worse. Not only are the rising home prices having an impact on farmland prices, but the large tracts of actively farmed land within lower B.C. that produce some of country’s best produce are now controlled by non-farmers, explains the Vancity report. These non-farmers lease out the land to farmers operating in B.C. The Vancity report estimates that as much as 35% of that land is owned by non-farming businesses, many described as holding companies with terms such as holding, investment, estate, property, land or development in their name, said report author Brent Mansfield, director of the BC Food Systems Network, during a Globe and Mail interview.
Up next: Possible solutions to Vancouver’s messed up real estate market.