CPABC Industry Update Summer 2015 - BC Real Estate Industry | Page 21

investors, adding much-needed rental accommodation supply. In addition, adjusting for inflation and wage growth, apartment condominiums have become more affordable over the past five years. Further, relatively stable prices have provided little incentive for short-term speculative activity in the apartment market segment. The single-detached home stock has declined in both absolute and relative terms in the Vancouver CMA. This increasing scarcity has led to significant price appreciation as consumers compete for the available stock. Regional residential densification efforts have led to relative price stability in multi-family housing over the past five years, as home builders have kept pace with demand. Multifamily housing now comprises twothirds of the Metro Vancouver housing stock and approximately 80 per cent of new home construction activity. The average home price in the region is an inadequate yardstick for housing affordability. Nearly 70 per cent of all MLS® residential transactions in Metro Vancouver during 2014 were below the average price of $738,000, with 32 per cent of homes sold below $400,000 and 82 per cent below $1 million. The Changing Housing Stock Metro Vancouver is Canada’s thirdlargest census metropolitan area and is home to over 2.4 million people distributed across approximately 950,000 households. Its geography is constrained on all sides by natural a n d l e g a l i m p e d i m e n t s to t h e supply of developable land. The vast suburban sprawl associated with many North American cities wasn’t able to fully take root in Vancouver as the relative scarcity of land forced housing stakeholders to look up rather than farther afield. Densification in Metro Vancouver has largely been a success, with the supply of multifamily housing more or less matching demand. Increasing residential density has also enabled the production of more compact communities with better transit and smaller ecological footprints. The flip-side to Vancouver’s density story is that single-detached homes are becoming scarce, both in absolute and in relative terms. Between the 1991 and 2011 census periods, the total stock of single-detached homes in the Vancouver CMA actually declined by over 1,000 units. More significant is the fact that the share of single -detached homes declined from 50 per cent of the housing stock in 1991 to barely a third in 2011. Single-detached homes are now a lot less common in Metro Vancouver and are fast becoming a luxury segment of the housing market. Indeed, fully 80 per cent of new construction activity in the Vancouver CMA is typically devoted to multifamily housing. Media reports have tended to focus on single-detached homes in the City of Vancouver. However, that market segment only comprises 15 per cent of singledetached homes in Metro Vancouver and just 5 per cent of the total housing stock. Affordability and Housing Stock Dynamics The dwindling supply of single detached homes relative to multifamily types has led to significant upward pressure on pricing. Over the past five years, the MLS® Benchmark price for a single detached home climbed 32 per cent to $1.1 million in the Real Estate Board of Greater Vancouver (REBGV ) area. However, apartment condominiums nudged ahead less than 7 per cent over the same period, largely the result of adequate new supply. Since wages have grown at a faster rate and mortgage interest rates are lower today than five years ago, apartment condominiums are more affordable today than in 2010. A common practice to measure affordability is in relation to the average home price in the region. This has proven to be an inadequate measure in Metro Vancouver as the housing stock is increasingly diverse.