Thursday, January 7, 2016

Affordable Housing in Metro Vancouver: Perception vs Reality

If you talk to most people in Metro Vancouver, they will tell you that this region is an unaffordable place to live. If you read, watch, or listen to the news, you will think that Metro Vancouver is on the brink of a mass-exodus of people because of the price of housings. Many local politician will tell you that we are in a housing crises.

This has created a perception that all housing is unaffordable in Metro Vancouver. Fortunately, this perceptions doesn’t equate with the reality of housing prices in our region.

Yesterday, I noted that single-family houses are in short supply in Metro Vancouver's most desirable areas. Due to space constraints, this supply will shrink further. The following table shows that the price of single-family housing is indeed unaffordable in most parts of Metro Vancouver. The only places that haven’t seen rapid increases in prices are Pitt Meadows and Maple Ridge. Of course, these are some of the least accessible places in the region.

Single Detached Housing Price Index ($) for Metro Vancouver Municipalities, June 2007 - 2015. Source: Metro Vancouver Housing Data Book. Select table to enlarge.

The story is different when it comes to semi-detached and row-housing. While some parts of the region have seen the average price of these styles of housing increase over the last five year, other areas have seen a dip in pricing. For example, Burnaby has seen the price of these types of housing decrease by 11% over the last five years. The only place with a notable increase was Surrey at 20%.

Semi-detached and Rowhouse Housing Price Index ($) for Metro Vancouver Municipalities, June 2007 - 2015. Source: Metro Vancouver Housing Data Book. Select table to enlarge.

The price of apartments have dropped rapidly throughout the region over the last five years with a few exceptions. The average price of an apartment in Burnaby, Coquitlam and Port Moody has rapidly increased in the last five years. This is due to SkyTrain expansion, making these areas more accessible. Richmond has seen an 8% increase in the average price of apartments over the five years, likely due to the Canada Line.

Keep in mind that driving a car is a major expense. While rapid transit does increase the value of nearby property, recent research shows that rapid transit actually increases the overall affordability of an area due to massive savings in transportation costs.

In Vancouver, one of the most desirable places to live in Metro Vancouver, the average price of an apartment has only increased in the more exclusive parts of that city. The average price of an apartment in East Van, has actually gone down.

Apartment Housing Price Index ($) for Metro Vancouver Municipalities, June 2007 - 2015. Source: Metro Vancouver Housing Data Book. Select table to enlarge.

So, is there a housing affordability crises in Metro Vancouver? Certain municipalities in Metro Vancouver should do more to include row-housing in their community development plans. Increasing the supply of social housing must be addressed too, but this is in the hands of the provincial and federal governments. At the end of the day, I don't think there is a crises.


Brendan Dawe said...

Are these constant or current dollars?

Nathan Pachal said...

Current dollars

Roman said...

The data from the Real Estate Board of Greater Vancouver from December 2015 shows numbers that are quite different:

5 year change for apartments: 26.6% instead of -2% in Vancouver East, 64.9% instead of 4% in Vancouver West, 54.1% instead of 4% in Greater Vancouver.

Townhouses rising 83% in Vancouver proper, 59.3% in Greater Vancouver, instead of the 2% in the Metro data.

Any ideas on what could explain such a drastic discrepancy?

Nathan Pachal said...

Yes, this is sales volumes, not price.

Roman said...

The images you have linked in the blog post are all prices, not volumes. So are the numbers I posted from REBGV. In fact, both reports claim that they are based on the same source data - the MLSLink benchmark price. So I'm quite confused about why they are so different.

Nathan Pachal said...

It looks like the chart from the REBGV is the change in the price index as opposed to Metro Vancouver's data which was looking at the actual price.

Roman said...

Hmm, I'm afraid that's not it either. The Metro Van data book is explicitly referring to the Housing Price Index.

Looked into it further - there's an interesting anomaly in the Metro data. Looking at Vancouver West table for Apartment Housing Price Index, for example, all the numbers seem to match up pretty much exactly to the REBGV numbers... until you go back to 2010 (or earlier), which conveniently serves as the basis for the 5 year increase calculation. The numbers there, for some reason, are significantly higher than REBGV.

Sorry to be nitpicky, but if we're going to draw conclusions from these numbers, we better be able to trust them, right?

So at best, this is debatable. More likely, if we trust the actual REBGV numbers, which according to the Metro databook are the source data, the affordable housing crisis in Vancouver is probably still a real thing.