Housing affordability is fundamentally linked to the relationship between the housing stock and market demand. Strong economic growth has created rising labour demand and consumer confidence side effects, while net migration and a wave of millennials entering their household-forming years have rounded out a “perfect storm” of demand-side momentum. In turn, the supply of resale homes on the market in Metro Vancouver has plunged to decade lows. This has led to continuing upward pressure on home prices, because elevated consumer demand hasn’t been matched by an equivalent increase in supply.

It’s more difficult for home builders to meet demand in a timely way, as the emphasis on higher-density communities lengthens the period between project conception and completion. This lag effect has exacerbated short-term market imbalances and even caused some in the media to question the efficacy of long-established market theory.

The inventory of newly-built multi-family homes that are complete and unoccupied has declined markedly over the past three years, and has trended at just 500 units this year. Home builders have taken notice: multi-family housing starts in Metro Vancouver have surged, up 40 per cent to 22,700 units in 2016, and 55 per cent above the 10-year average. An estimated 19,700 multi-family starts are expected this year, and a further 19,000 units forecast in 2018. All this construction activity has created a record level of homes under construction, with about 35,000 multi-family units now in development.

Using data on the average time between housing starts and completions from Canada Mortgage and Housing Corporation (CMHC), we can estimate when the surge in multi-family construction will turn into ready-to-occupy homes. According CMHC, it takes more than 20 months for an apartment project to proceed from start to completion in Metro Vancouver. This varies from a high of 35.7 months in Downtown Vancouver to a low of 12.5 months in Surrey. (Keep in mind that CMHC records a multi-family project as a housing start only after the underground parking structure is complete, so the time between issuing a building permit and project completion is much longer.)

According to our estimates, multi-family home completions will increase 50 per cent above trend levels, rising from less than 4,000 units per quarter in 2016 to approximately 6,000 units through the third quarter of 2018.

While most of these units are already presold, these multi-family completions can add to the overall supply of housing through several other channels: • Households in Metro Vancouver transferring from the rental market into home ownership free up rental supply. • Households in Metro Vancouver moving from existing ownership bolster supply when they put their homes up for sale. • Investors intending to earn rental income create additional rental supply.

The aggregate increase in the housing stock can also help dilute the impact of migrants, non-income seeking investors and first-time buyers/renters on the cost of housing.

This surge in multi-family completions isn’t the only solution for housing affordability in Metro Vancouver. However, a marked increase in aggregate supply can move the needle toward market balance and help slow the pace of housing price/rent growth in the region.

Provided By: BCREA - "Copyright British Columbia Real Estate Association. Reprinted with Permission" 

Metro Vancouver* home sales exceeded typical historical levels in October with the majority concentrated in the townhouse and apartment markets.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in the region totalled 3,022 in October 2017, a 35.3 per cent increase from the 2,233 sales recorded in October 2016, and an increase of 7.1 per cent compared to September 2017 when 2,821 homes sold.

Last month’s sales were 15 per cent above the 10-year October sales average.

"Conditions continue to vary significantly based on property type. The detached home market is well supplied with homes for sale, which is relieving pressure on prices," Jill Oudil, REBGV president said. "It remains a much different story in the townhouse and apartment markets. Buyers of these properties continue to have limited supply to choose from and are seeing upward pressure on prices."

There were 4,539 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in October 2017. This represents a 14 per cent increase compared to the 3,981 homes listed in October 2016 and a 15.6 per cent decrease compared to September 2017 when 5,375 homes were listed.

The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 9,137, a 0.1 per cent decrease compared to October 2016 (9,143) and a 3.5 per cent decrease compared to September 2017 (9,466).

For all property types, the sales-to-active listings ratio for October 2017 is 33.1 per cent. By property type, the ratio is 16.8 per cent for detached homes, 44.8 per cent for townhomes, and 66 per cent for condominiums.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below the 12 per cent mark for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

"The growth in our provincial economy and job market is contributing to today's demand," Oudil said. "The federal government's announcement of plans to tighten mortgage requirements for the seventh time in the last eight years also helped spur activity in the short term. Many buyers are trying to enter the market before the changes are in place."

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,042,300. This represents a 12.4 per cent increase over October 2016 and a 0.5 per cent increase compared to September 2017.

Sales of detached properties in October 2017 reached 940, a 44.2 per cent increase from the 652 detached sales recorded in October 2016 and a 34.6 per cent decrease from the 1,437 sales in October 2015. The benchmark price for detached properties is $1,609,600. This represents a four per cent increase from October 2016 and a 0.5 per cent decrease compared to September 2017.

Sales of apartment properties reached 1,532 in October 2017, a 30.1 per cent increase compared to the 1,178 sales in October 2016 and a 0.7 per cent decrease from the 1,543 sales in October 2015. The benchmark price of an apartment property is $642,000. This represents a 22.7 per cent increase from October 2016 and a one per cent increase compared to September 2017.

Attached property sales in October 2017 totalled 550, a 36.5 per cent increase compared to the 403 sales in October 2016 and a 17.4 per cent decrease from the 666 sales in October 2015. The benchmark price of an attached unit is $802,400. This represents a 17.7 per cent increase from October 2016 and a two per cent increase compared to September 2017.

*Editor’s Note: Areas covered by the Real Estate Board of Greater Vancouver include: Whistler, Sunshine Coast, Squamish, West Vancouver, North Vancouver, Vancouver, Burnaby, New Westminster, Richmond, Port Moody, Port Coquitlam, Coquitlam, Pitt Meadows, Maple Ridge, and South Delta.

The real estate industry is a key economic driver in British Columbia. In 2016, 39,943 homes changed ownership in the Board’s area, generating $2.5 billion in economic spin-off activity and an estimated 17,600 jobs. The total dollar value of residential sales transacted through the MLS® system in Greater Vancouver totalled $40 billion in 2016.

The Real Estate Board of Greater Vancouver is an association representing more than 14,000 REALTORS® and their companies. The Board provides a variety of member services, including the Multiple Listing Service®. For more information on real estate, statistics, and buying or selling a home, contact a local REALTOR® or visit
www.rebgv.org.