Vancouver real estate prices have stopped surging on excessive expectations they will keep rising in the future, but still remain expensive compared to local economic conditions.
Francis Georgian / PNG
Think back to when we were young and it was convenient to hide under the covers because there was a monster in the closet. Reality was neither convenient nor logical. Something similar could be said of Metro Vancouver’s real-estate market in recent years. Almost every conceivable reason for rising prices has been examined, but it’s the so-called “monsters” — foreign buyers/capital or money laundering — that is the focus of attention.The reality is that government policy is not dealing with the real issues of actual supply and demand while our housing affordability problems are getting worse and people keep moving here.So far, we have seen government policy attacking the upper end of the market as a measure to attain affordability in the overall real-estate market, but to what end? To stop “foreign investment” in homes that often add to rental supply? Surely, they are not all empty, but it’s easier to assume they are. And are they all foreign owned? Any argument to the contrary is met with disdain and a bias toward the real estate industry.The Horgan government also made it a sin for anyone to have a recreational or second property. But did the speculation and vacancy tax provide locals with rentals or supply more homes for sale? Not to any great degree. The positive: it opened up Shaughnessy and West Vancouver homes for rentals to a few students. Unfortunately, it also brought their values down by 30 to 45 per cent. That’s hardly of benefit to the average, middle-income Vancouver earner.The federal mortgage stress test, the foreign buyer tax, the speculation and vacancy tax, the increased transfer tax and the school tax on homes assessed at more than $3 million have all pushed buyers to lower-priced properties. In Greater Vancouver, according to MLS sales, 68 per cent of homes for sale are priced at over $1 million, while 66 per cent of sales so far in 2019 (9,018) were below that price. Just three per cent of sales were on properties that sold above $3 million.With the mortgage stress test affecting the lower end of the market the most, first-time buyers aren’t moving out of rentals, further exacerbating the rental-supply shortage. And many homeowners wanting to make a move to their next home are stuck as a result of a government intentionally freezing the market with the above-noted policies.Is the reason for all these policies on demand really monsters in the closet? Is it more likely the market of the last few years been a steady stream of buyers moving to Vancouver from within and outside Canada together with local buyers benefitting from economics of the day? Now those from the outside that want to purchase a home and contribute to our economy will seek lower-priced homes to minimize their tax burden. Get the picture?Policies to earn votes without sound economic modelling hasn’t helped affordability. In fact, it is has just put real estate on sale for those who can can afford to buy. The downside is that these owners have less equity to retire on or share with their children to place them in the housing market. To me that’s “generational theft.”The current supply of homes for sale is the lowest we’ve seen in a down real-estate market. Once the cranes come down on new condos, there will be much fewer going up. What will house the increasing supply of buyers coming to the market, who in turn are desperately required to sustain our economy? As we’ve seen from recent municipal council rejections of rental projects, supplying rentals has been repeatedly left to the private sector. But their projects get turned down, face delays or experience costs that make it impossible to keep up with today’s prices for new homes.It seems that all levels of government are swinging bats at the demand side without a coherent plan that addresses the supply side or how their policies impact the economy.Ask yourself, how has the government at all levels made homes more affordable? Or are we just hiding under the covers?Kevin Skipworth is a partner and the chief economist at Dexter Realty.Letters to the editor should be sent to email@example.com. The editorial pages editor is Gordon Clark, who can be reached at firstname.lastname@example.org.CLICK HERE to report a typo.Is there more to this story? We’d like to hear from you about this or any other stories you think we should know about. Email email@example.com