the changing housing stock, affordability & dynamics

Vancouver is Canada's third largest census metropolitan area and is home to 2.4 million people distributed across approximately 950,000 households.  Its geography is constrained on all sides by natural and legal impediments to the supply of developable land.  The vast suburban sprawl associated with many North American cities wasn't able to fully take root in Vancouver as the relative scarcity of land forced housing stakeholders to look up rather than farther afield.  Densification in Metro Vancouver has largely been a success, with the supply of multi-family housing more or less matching demand.  Increasing residential density has also enabled the production of more compact communities with better transit and smaller ecological footprints.

The flip-side to Vancouver's density story is that single-detached homes are becoming scarce, both in absolute and in relative terms.  Between 1991 and 2011 census periods, the total stock of single-detached homes in the Vancouver CMA actually declined by over 1,000 units.

Most significant is the fact that the share of single-detached homes declined from 50% of the housing stock in 1991 to barely a third in 2011.   Single-detached homes are now a lot less common in Metro Vancouver and are fast becoming a luxury segment of the housing market.  Indeed, fully 80% of new construction activity in the Vancouver CMA is typically devoted to multi-family housing.  Media reports have tended to focus on single-detached homes in the City of Vancouver.

However, the market segment only comprises 15% of single-detached homes in Metro Vancouver and just 5% of the total housing stock.

The dwindling supply of single-detached homes relative to multi-family types has let to significant upward pressure on pricing.  Over the past five years, the MLS® Benchmark price for a single-detached home climbed 32% to $1.1 million in the Real Estate Board of Greater Vancouver (REBGV) area.  However, apartment condominiums nudged ahead less than 7% over the same period, largely the result of adequate new supply.  Since wages have grown at a faster rate and mortgage interest rates are lower today than five years ago, apartment condominiums are more affordable today than in 2010.

A common practice is to measure affordability in relation to the average home price in the region.  This has proven to be an inadequate measure in Metro Vancouver as the housing stock is increasingly diverse.  A more realistic measure would be how many households can afford lower priced homes.

The average MLS® residential price in Metro Vancouver was $738,000 in 2014.  However 70% of the homes sold were below this threshold.  Using the average price as a first-time buyer yardstick implies that a significant number of first-time buyers should be able to purchase a home priced in the top third of all home values.  Typically, around a 30% of the home buyers in Metro Vancouver are purchasing their first home.  it is no coincidence that 32% of the home sold in the Metro region were priced below $400,000 in 2014.

(Source of photo, excerpt of text & charts: British Columbia Real Estate Association)