Kerry Gold, The Globe and Mail, Oct. 24, 2015
Picture a map of the Lower Mainland and a growing wave moving outward from Vancouver, and you will get a general sense of increasing house prices.
The $1-million line used to divide the east side of the city from the west, and then it crept all the way to Burnaby. Now, it’s moving like a rapidly rising tide, with the average house price easily crossing the $1-million mark in North Vancouver, Burnaby, Port Moody, Richmond and White Rock, which is something of an outlier because of its distance from the urban centre.
Average East Vancouver price growth is accelerating at an even faster pace than the west side of the city. House prices on the east side have shot up 54 per cent in the past five years, compared with a 50-per-cent increase on the west side in the same period. But average prices beyond Vancouver’s borders are escalating at nearly the same rate, on a percentage basis.
Today, the average sale price is $3.101-million for a house on the west side of Vancouver; $2.801-million for the city of West Vancouver; $1.405-million for the district of North Vancouver; $1.284-million for Richmond; $1.236-million for a house in Burnaby; $1.190- million for an east side Vancouver house; $1.111-million for White Rock; and $1.004-million for Port Moody.
Those are average sales of all detached houses as of August provided by Landcor Data Corp. The data show the pressure of increased house values is not exclusively a Vancouver city problem. Vancouver’s rising tide is lifting surrounding municipalities beyond the reach of the average income earner.
There is clearly top-down pressure from the high end of the market that is sending buyers scrambling outward for the most affordable houses.
“I think you are starting to see people considering some markets more than they were in the past,” Urban Analytics’ Michael Ferreira said.
The residential real estate researcher gave a talk at the Urban Development Institute in Vancouver on Thursday on his affordability index. He says we are seeing the ripple effect of foreign investment at play. Offshore money is driving the high end on the west side, and it’s transforming formerly middle class areas throughout the region. Where offshore interests go, price increases follow.
“The rise in home prices over the past few years has been isolated to those markets that the new immigrant buyer is really attracted to, specifically the Chinese buyer. You have seen a huge increase in that buyer group, even in South Surrey,” Mr. Ferreira said.
“But from our perspective, even in the new condo and townhome market, we are seeing that buyer group very active. And ever since the Canadian currency dropped over the past year, you can see a definite correlation because Chinese currency is tied to the U.S. dollar.”
Central 1 Credit Union chief economist Helmut Pastrick expects prices to increase significantly in the next 10 or 20 years. He doesn’t expect a downturn in the near future, especially with limited supply and the pressure of outside buyers.
“Right now prices are expanding at double-digit rates, and I think that will play out for another three to six months. We need more listings and new supply, and once that happens prices might slow to single-digit rates.”
With local buyers locked out of the west-side market, east-side neighbourhoods are out-performing the west side. A recent Sotheby’s report shows average price increases in Arbutus, Dunbar, Kerrisdale, Point Grey/UBC and Shaughnessy of between 10 per cent and 16 per cent. Meanwhile, Fraserview saw a 26.5-per-cent increase, Grandview 30.1 per cent and Victoria 33 per cent.
White Rock may not be central or well connected by transit, but it places third in terms of price growth, averaging a 50-per-cent increase over the past five years. That market is driven partly by boomers looking to cash out of Vancouver, and by buyers from Mainland China moving into South Surrey because of its high-calibre schools.
Real estate agent Hamish Ross, who grew up in White Rock, says offshore money started flowing in around 2011, and it’s continued steadily. He’s seen houses go up $200,000 since the start of the year.
“It’s hard to fathom,” he said. “The quiet sleepy town feel is definitely changing.
“One of the reasons the market is going crazy is that all our houses are being knocked down and being rebuilt. As someone who grew up here, it’s sad to see these great old character houses coming down and being replaced with a generic monster home that is 5,000 square feet or plus.”
However, many of those big expensive homes are sitting empty, he said, because speculative builders have built too many of them. The wealthy offshore buyer tends to prefer South Surrey because of the good schools. There is still far more demand in White Rock proper for starter homes; however, those seldom go for below $800,000 any more.
“I rarely have clients under 40 that are looking at houses, just because they can’t afford it.”
You seldom hear about the property boom that is happening in Port Moody. But the huge lot sizes and waterfront views have also sent prices skyrocketing. Mega mansions have sprung up, particularly around the village of Anmore. People who want to live in a big house get more bang for their buck compared with Vancouver prices. As well, like most of the region, supply is at an all-time low, which is causing price increases. Probably because there’s nothing to buy, people are not selling.
“More houses have sold [in Port Moody] for over $2-million than I can remember,” real estate agent James Garbutt said. “I counted 21 of them. The highest was a $3.6-million sale.”
New Westminster, meanwhile, remains surprisingly affordable even though it’s central and well connected to transit. The average house price there is $799,868. That average house would be $200,000 more if it were located just five minutes away in Burnaby. Part of the reason for the lower prices is New Westminster has smaller lots and older housing stock than Burnaby, which is undergoing a major boom in development. But Mr. Garbutt said short supply is driving prices there as well, just more slowly. Young families leaving Vancouver are behind the demand.
“I think North Vancouver and New Westminster are in the same boat – not driven by the offshore buyer, but driven by people who can’t buy where they thought they were going to live because of offshore buyers,” he said. “It’s all trickling down. Even Port Coquitlam, which everyone thought was off the map, has become a bit of a hot pocket, too.”
Surrey isn’t yet feeling the same pressures, with an average price that is relatively affordable at $784,086. And in Pitt Meadows and Maple Ridge, prices have flat-lined for the past several years, making it affordable with an average house price of $573,000 in both Pitt Meadows and Maple Ridge. The market is soft in those areas because there is a glut of housing stock.
“There is more supply of single family homes, whereas in urban markets, it’s a shrinking supply,” Mr. Ferreira said.
“They are creating new single-family lots in parts of Surrey and Langley and Ridge Meadows. And meanwhile, we are losing single-family lots in the more urban markets. So it’s supply, plus it’s a completely locally driven market, where you are not seeing that new immigrant buyer coming into those areas.”
But ultimately, prices will only continue their ascent, Mr. Pastrick said.
“Future generations will be more likely to live in higher density homes than we are,” he said. “That’s part of the adjustment process. The other adjustment process will be an increasing number of renters. And definitely the prices in the burbs will go up.”