What price fame? I have been honoured to be recognized in new ways in real estate circles in recent months, since speaking out on the need to address unaffordable housing prices and the impact of offshore investors. A homebuyer on the west side says realtor Danny Deng approached her and showed her my picture, saying that because of me, foreign ownership of local real estate may soon be restricted, so she should sign up with him now so she could get a high cash payment from his wealthy overseas buyers.
Earlier, in May, I rated a mention in Bob Rennie’s annual talk to the Urban Development Institute, who said my comments about the influence of foreign investors in local housing affordability may contain more speculation than those I accuse of speculating.
You have to take out the top 20% of the market to get a clear picture, Rennie said. The average sale price of the remaining 80% is only $313,500, he said, concluding, “Vancouver is definitely not worthy of a ‘least affordable title.’”
To which one online commentator said: “Yeah, if you take out the 20% of the people with drug issues in Vancouver, the city is definitely not the drug capital of Canada.”
Besides, said Rennie, we can prove there are only a small number of foreign buyers because there are a minuscule number of buyers whose property tax documents are sent to a foreign address. And this proves something?
The Urban Futures Institute, clinging desperately to “proven data” from census figures, shrugged off the whole affordability issue by concluding that the average homeowner in Vancouver spends only 18% of his or her household income on housing costs, so “there is no empirical basis on which to say that B.C. currently suffers from widespread owner-occupied housing affordability problems.” That average homeowner, of course, includes people who have long since paid off their homes, which blithely ignores the load on struggling entry-level homebuyers.
Remember, this all started with a January 2011 Demographia International housing affordability survey that showed for the third quarter of 2010, the city had a median house price of $602,000 and a median household income of $63,100, making us the third most unaffordable city of 325 surveyed, outranked only by Hong Kong and Sydney. Our ratio of house prices to income was 9.5, with 5.1 being considered “severely unaffordable.”
Royal LePage seemed to agree, with its latest study showing “the average price of detached bungalows and standard two-storey homes both over $1 million and double-digit year-over-year gains, [even] though the average price for a standard condominium saw a very modest increase of 2.5 per cent … as investment from outside of the country continues to support higher price levels.”
They’re missing the point, counter the deniers.
CIBC’s chief economist repeated Rennie’s theme but with wildly different numbers, saying 80% of the market is “normally functioning, consistent with income,” based on an average sale price of the bottom 80% of “just over $590,000” compared with Rennie’s $313,000.
OK, so that puts us at a 9.4 ratio, about three times what’s considered affordable. That’s “consistent with income?”
Not to worry, it’s only out of whack because we don’t understand the difference between “average” and “median” and we’re not including properties in Abbotsford and Mission, says Central 1 Credit Union economist Brian Yu, pegging the entire Fraser Valley and Metro Vancouver average house price at $738,000, 11% below the number cited by the Greater Vancouver Real Estate Board, a body I would have thought knew something about calculating housing prices. OK, let’s go with $738,000.
That makes the price-to-income ratio a crazy 11.7 to 1.
All of this is to say that Greater Vancouver needs a sober assessment of the impact and source of wildly unaffordable housing prices, and real estate industry people should not be leading it.
Peter Ladner ([email protected]) is a founder of Business in Vancouver and a former Vancouver city councillor. His book, The Urban Food Revolution: Changing the Way We Feed Cities, will be published by New Society in October 2011.