“One Tin Soldier Rides Away” – The Past
Well the ‘behind closed doors’ government efforts to slow down the Vancouver’s real estate market was, in fact, quite successful. We have had experienced one of the quietest stretches in our market that I can remember apart from the 1980 market crash when interest rates hit 20% – remember Nelson Skalbania? (age giveaway!) The provincial Greens’, NDP, and even the federal Liberals can celebrate their victory. . . like when the Valley people killed all the mountain people and gathered ‘round the treasure chest to open it as the song goes. But, when the Valley people opened the chest the note inside read “Peace on Earth”. All the mountain people wanted was to share their treasure and live in peace.
But in their efforts was the government really victorious in making real estate affordable to the average Canadian? No, as with the parallel of the song above, all the Vancouver real estate market wanted was to share its wealth by contributing hundreds of millions to the BC Economy via massive employment of all those benefitting from a robust market (carpenters, painters, labourers, Notaries, furniture salespeople, flooring suppliers, glass manufacturers, hi-tech smart home businesses, measure-masters, photographers, printers, etc.) Last year real estate contributed over 18% to the BC GDP.
The MLS Housing Price Index Benchmark price for houses on the westside fell by 6-9%. So instead of the average house on the Westside costing $3.6M, it’s now $3.3M. And east side detached houses fell only 1.7% by about $30k.
For detached houses to be affordable to the average wage earner, in Vancouver prices need to fall below $1M and we just don’t see that happening. No one will sell. In fact, over the past year the government programs initiated had the reverse effect on condos and townhomes causing prices to increase by 7-9%. Why? Because buyers who would have otherwise purchased detached homes could no longer do so under the new “Stress Test” guidelines. They were forced to purchase condos/townhomes which further heated up that product category.
The only thing the programs may have achieved is win each level of government some votes from frustrated residents not being able to purchase a home in Vancouver. It failed miserably and cost the taxpayers millions to implement and cost our economy hundreds of millions in lost potential revenue as we watched investors flow to Seattle and Toronto. . . .” and one tin soldier rides away”.
We believe that the free market is the free market and performs best when left alone and unhindered. Yes, prices will appreciate and many who would love to live in our city may not be able to afford to do so unless they adjust their expectations. And yes, many foreigners will purchase property here but that is the reality of a free market and chances are something will happen within our marketplace to shift things around a little.
Shifting Things Around A Little – The Present
One thing that our local government is doing to help accommodate the high demand for housing in Vancouver, is to in increase zoning density. Increasing zoning in the RS single family neighbourhoods will allow more homes to be built on the same lot. Currently, zoning allows for three homes (main residence, secondary suite, and laneway house). In fact, City Council is now considering duplex zoning on all RS single family lots. Yes, there are some repercussions to such a massive rezoning such as parking, denser living, increased traffic, more demand on civic resources and services. There are details to be worked out, of course, but chances are this will allow for more families to live within our city. In addition, the RT7/RT8 zoning guidelines will also be relaxed to allow for easier demolition of character homes for redevelopment into strata duplexes. Yes, some character will be lost but something has to give and perhaps this is an area the public would be willing to allow some concessions on. City council is planning public hearings on the issue and my guess is they are wanting to push the rezoning through before the October election.
What About Positive Programs? The above is an example of the government doing something positive to react to the housing crisis. that does not penalize the buyers or exclude certain groups.
Rather than adding tax after tax, or making it more difficult to borrow money, why not be more creative and come up with programs that support the purchaser. Perhaps:
• special lending rates for first time Canadian home buyers
• greater exemptions from Property Transfer tax for those getting into the market
• or even interest free down payment loans with 20-year payback for families wanting to buy a home
• and 997 more positive ideas. . .
There are many approaches our government could take to have a positive impact on our housing market. It’s time for our politicians to think outside of the box and I believe it’s not too late!
Market Outlook – The Future
My read on the fall market is somewhat positive. For over 26 years, I have seen that the market ebbs and flows. Whenever there is a slow down for whatever reason, the demand in the background continues to build. As I’ve said before it’s like a dam that builds water behind it when the flow is turned down. People are always downsizing, having children and needing larger homes, relocating in and out of our city, etc. So, when the continuous demand on housing is there and the demand is not met, it builds in the background, like the water level in a dam. At some point after our market adjusts to all the new programs, and consumers become more comfortable, we will begin to see the flood gates open. Transactions will and are already are beginning to take place opening up more product for those waiting buyers who will in turn have something to sell. And so begins the awakening of a stifled market. Sometimes this happens naturally and sometimes a catalyst is needed to ignite the market.
Once the increased activity and price appreciation is exposed by media, more buyers/sellers join the activity and soon the market becomes very active. There are already signs in that our market activity is increasing and I expect a healthy fall market. A full recovery? Yes of course it will happen, however, how and when are yet to be seen as our fall market and upcoming spring market unfold.