The city of Vancouver offers almost everything that an individual could want in a city: diversity, culture, every amenity, a strong job market and easy access to world-class recreation. But, much like anything, this opportunity comes with a drawback: very expensive real estate prices.
In fact, according to the February 2020 data from the Real Estate Board of Greater Vancouver (GVREB), the current benchmark price for Metro Vancouver is $1,020,600, with 4,002 new listings in February. In the 2020 RE/MAX Affordability Report, Vancouver ranked as the most unaffordable market with almost 60% of an individual’s monthly income required for a mortgage. In comparison, Edmonton residents only need to allocate, on average, 34.3% of their household income to real estate ownership.
When reading up on the many aspects of the housing market in Metro Vancouver, some common names appear in the headlines. But with all this information exchanged, there are some instances where financial contributions and support are given to these influential public figures by those who profit from the real estate bubble – namely, real estate developers. According to Money Sense, a commonly quoted individual, Tsur Somerville, has been reported to be on the receiving end of financial contributions from developers.
Conversely, outspoken individuals with authority in the state of the city’s real estate market that aren’t reported to be funded by outside interests aren’t given flattering exposure in the media – therefore making it difficult to find an unbiased source of information when it comes to insights into Vancouver’s expensive real estate market.
Foreign Real Estate Buyers
A Vancouver census in 2019 uncovered that 8.3 percent of condominiums in the city were owned by non-residents. Similarly, the Canada Mortgage and Housing Corporation (CMHC) released findings that indicate that overall, 11 percent of Metro Vancouver condos are owned by a non-resident, an aggregate of entirely owned and partially owner residential properties.
When wealthy foreign buyers and investors enter the Vancouver real estate market, the impact isn’t isolated. With every sale (and there are a great many of them, some from the same buyers within just weeks of each other) the rest of Vancouver’s metropolitan area is affected, driving house prices up as a result of lower availability.
There have also been reports that some entities have been able to pull MLS listing information before they are made public, giving foreign investors and real estate buyers the opportunity to be the first to buy property in the ever-competitive city.
Vacant and Neglected Real Estate in Vancouver
While unaffordability in the bustling centre of Metro Vancouver still persists, there are reportedly 15% of downtown condos sitting vacant or hardly occupied by only non-permanent tenants. This means that much of the city’s real estate is largely used as an investment or to hold funds from those who aren’t occupying or currently seeking to occupy the property.
As a result, valuable residential spaces that could be occupied by individuals that are looking to reside in Vancouver are left with fewer choices and, with low availability comes higher housing prices.
Real Estate Regulations
A number of regulations have been implemented in the city’s real estate market, but some are not stringent enough to truly mitigate the issue of the unaffordable housing market in Vancouver. The result of lax regulations quickly translates to real estate agents looking the other way when buyers don’t meet the requirements since many penalties don’t come close to matching the significant commissions that the agent receives. In reality, the penalties are simply a slap on the wrist, rather than a true, effective deterrent.
As a solution, stiffer penalties that would outweigh the benefits of turning the other cheek would reduce the effects on Vancouver’s expensive real estate problem. If the province of British Columbia were to follow suit to its neighbours Alberta and Ontario, its penalty for real estate agents that breach regulations would be up to $25,000, rather than the significantly lower $10,000.
Unfortunately, the reality of Vancouver’s housing market has some ties to money laundering. For some property owners, real estate is a viable way to launder offshore money. The two governing bodies that have a role in monitoring real estate and finance are The Canadian Real Estate Association (CREA) and Financial Transactions and Reports Analysis Centre (FINTRAC).
One of the ways in which real estate agents should be taking steps towards preventing money laundering is by requiring a valid piece of government-issued ID, proof of the source of income and failing to report large cash transactions. These findings were unearthed as a result of FINTRAC’s investigations.
Flipping Homes For a Profit
For the common homebuyer, buying a home is a long process and requires a great deal of thought. But what has become increasingly apparent in Vancouver’s housing market is the result of quick home sales that then turn into highly profitable sales in no time.
This tactic that is commonly used in highly competitive real estate markets is often called “shadow flipping” in layman’s terms but is officially called assignment sales. This particular type of sale allows the current buyer of a property to sell their ownership in the property to another buyer, even before the first sale is finalized. While this is not typically possible in many other jurisdictions and provinces, Vancouver and British Columbia’s lower mainland is exempt from this type of regulation, making it easier for real estate to be considered a revenue-generating game, rather than a place of residence.
The Future of Vancouver’s Housing Market
Metro Vancouver did see a decrease in average house prices in 2019, but the outlook for 2020 still indicates that housing prices are very expensive for the average homebuyer. That said, there is still some indication that the housing market in Vancouver for the year will not be increasing dramatically; the increase in housing prices is reported to be only 1 percent according to the BCREA.
For more real estate market insights, stay up to date with REMAX Canada’s blog, as well as buyer and seller resources.