Single-family homes have been the winners over the long term while apartments have been struggling, an analysis of Metro Vancouver real estate statistics released last week shows."The resource that is scarce is land," said Tsur Somerville, director of the centre for urban economics and real estate, Sauder School of Business at the University of B.C. "You can always build more condominiums, but if you want a backyard, there's a limited space."
He said that isn't likely to change soon, despite the large cohort of baby boomers who could choose to downsize in the near future.
"Most people stay in their houses longer than you expect," Somerville said. "They want space for the grandkids."
What drives Vancouver's house prices so relentlessly to levels four times higher than Winnipeg's, and more than half again what Torontonians pay?
It's simple, says Tsur Somerville of UBC Centre for Urban Economics and Real Estate.
"If you want Winnipeg-level house prices here, all you have to do is tear down the mountains and fill in the ocean."
Well, that puts slow or stop to the steady influx of people - though the massive loss of amenities if our landscape were to be suddenly levelled might do that automatically.
"Depending where you draw the circle," Somerville says, "70 per cent of the land isn't developable. It's mountains or water or the United States."
Then, on top of this insurmountable geographic limitation, add the relentless population growth that, in good years and in bad, ranges from 1.3 to 1.5 per cent a year.
"The higher the population of a city, the higher the house prices," he says. "If we lose 70 per cent of the land, our metropolitan area of two million will have the same house prices as a seven-million metropolitan area. Because people have to commute the same distance."
“West Vancouver, the west side (of Vancouver) and Richmond are all down five to eight per cent from the peak earlier this year,” noted Tsur Somerville, director, centre for urban economics and real estate, Sauder School of Business at the University of B.C. “In contrast, the Coquitlams, the Deltas, the Maple Ridges, the Burnabys are down one to three per cent. The areas that had the most intense run-up in 2010 and 2011 are the ones where prices are weakening more.”Somerville noted that a few areas still saw prices rise in the year, including Squamish’s five-per-cent price hike - the highest in the region.“This is the first time since 2007, 2008, when prices have come down by this degree,” added Somerville. “When you have nine months of continuous months of weak sales, it will show up on the price side.”Somerville believes high prices, and reduced economic optimism, are behind the sales drop. “And cycles happen.”
Just a thought.
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