Local Government Regulations Worsening Canada’s Housing Affordability

The rising prices for new homes in Canada’s most costly cities are a result of the government’s housing regulations, according to policy-research group C.D. Howe Institute.

The institute’s latest report, released Tuesday, said that single-family detached houses across Canada were subject to a steep increase in prices, due to factors such as zoning rules, delays on permit approvals and municipal development fees.
Eight areas of focus are contained in the study – including Toronto, Calgary, Vancouver and Ottawa-Gatineau — where new-home prices are more than 20 percent higher than the cost of construction.

From 2007 to 2016, barriers to homebuilding added an average of $229,000 to the price of a house located in those regions.
The greatest impact was in Vancouver, where buyers paid an average of $644,000 extra for a new house, which works out to about half of the total price. That proportion is equivalent to what other studies have found for Manhattan, C.D. Howe said.
Excessive government regulations are to blame for barriers inhibiting new construction, the group said in the report. It goes on to explain that housing markets function best when the market price of housing is very close to the feasible cost of constructing it, so when prices exceed this construction cost, it’s generally due to extra factors such as government interference.
Prices for homes in Vancouver and Toronto have surged 81 percent and 64 percent, respectively, over the past five years, according to March data from the Canadian Real Estate Association.

The demand outpaces supply in both cities, where housing prices have stayed consistently high despite government policies to tame the increases, such as taxes on foreign buyers and stricter mortgage rules.
When barriers arise to building homes, the cost of existing homes goes up, as buyers are left to compete for the housing that is available. The C.D. Howe study found that barriers to development have added more than $100,000 on average to prices for both new and resale homes in some parts of Ontario.

Cities and provinces have taken some initiatives to assist with housing affordability, such as new taxes, however, further measures can still be taken to make it easier to develop land. Two such changes are that zoning laws could be simplified and developer fees could be reduced. We must ask what the true motives are behind the actions taken by the government when it comes to this issue of affordable housing.

Millennials say: Goodbye Toronto, Vancouver

Millennials say: Goodbye Toronto, Vancouver

Younger adults are leaving Canada’s most expensive cities at a rapid rate, according to Statistics Canada data.

The latest intraprovincial migration numbers show that the number of people leaving the cities for different parts of the province is accelerating, especially amongst the millennial demographic. Millennials are a demographic that will be entering their prime earning and home-buying years soon, so this is not a positive trend to be witnessing.

The total change of people that left the city for another part of the province is called the net intraprovincial migration. For example, if someone from rural Ontario moves to Toronto, and no one leaves Toronto, the net intraprovincial migration is one. If one person moves to Ontario, and three people from Toronto move to Hamilton, the net intraprovincial migration is minus-2. The ideal scenario is that a region attracts more people from other parts of the province than they lose. This number is different from immigration, but is just as important.

Getting people to move to a city is a positive thing, but it’s even better to retain the people who are already living there. At the end of the day, cities are built to sustain people’s lives and not to serve as a marketing tool for attracting new residents who may be disappointed once they arrive. A major change in the intraprovincial migration numbers could be indicating that there is an underlying problem not being addressed or reflected in current government stats.

142,000 people leave Toronto for other parts of Ontario

Toronto’s net intraprovincial migration numbers have been plummeting. Between 2012 to 2017, the net intraprovincial migration was minus-142,465, which is a 77 percent greater loss than the period before. This means that over 142,000 more people left Toronto for other parts of the province than Toronto attracted. This loss is happening much faster than the rate of population growth. It’s clear that what’s happening is that more people are leaving Toronto for cheaper parts of Ontario.
When we look at the age breakdown of those who are leaving, the 20 to 34 year old age bracket saw a net decline over 300 per cent larger than the period before.

To compare, the 35- to 49-year age bracket saw a net decline around 48 percent larger than the period before. Toronto is losing young people at a very rapid pace, to other parts of the province.

B.C.’s Lower Mainland area (including Vancouver) loses over 18,000 people to other parts of the province

The Lower Mainland, the most densely populated part of British Columbia, is also losing people, though faring a bit better than Toronto.

From 2012 to 2017 the region saw a net migration of minus-18,670 people, a loss that was 180 percent greater than the period before. Though the number seems relatively small, B.C. is a province with a much smaller population than Greater Toronto. The net loss to other regions represents a huge increase.

As with Toronto, more people are leaving Lower Mainland for cheaper parts of British Columbia. Two interesting demographics are changing in the province. To start, seniors represent the largest loss with the 65-plus demographic showing a net migration of minus-2,575, a whopping 344 percent more people compared to the previous period.

Secondly, the millennial demographic of 20-to-34 year olds saw net intraprovincial migration reach minus-139, a 103 percent decrease from the period before. This demographic was previously the only demographic not in decline across the region.

It is ironic that the regions of Vancouver and Toronto spend huge amounts of cash to attract millennials. Theoretically, at this point in their lives, millennials should be putting down roots and entering their prime earning years. Retaining millennials is typically a win for both the local economy, as well as birth rates in the region. Any savvy business person knows that it’s cheaper to retain an existing customer than it is to attract a new one. Perhaps it’s time for politicians to take a page from that book?

Fraser River Surges: Chilliwack Properties Evacuated

Fraser River Surges: Chilliwack Properties Evacuated

An evacuation order has been issued for a handful of Chilliwack properties as the Fraser River swells with freshly melted snow.

The City of Chilliwack has ordered residents to abandon the properties at Carey Point, as the weather forecast reveals the river is expected to rise by more than a full meter over the next week.

The city said that staff are continuously monitoring river levels and are taking every precaution to ensure public safety, in the event that there may be a flood.

Some properties remain under evacuation alert, meaning residents must be prepared to flee at a moment’s notice.
The Fraser River is currently 5.5 metres deep and flowing at 9,300 cubic metres per second at the Mission gauge. It’s expected to hit 5.75 metres over the next 24 hours, and peak at 6.6 metres by early next week.
Officials say these predictions could change significantly if the forecast changes, as they are based on current weather conditions.
According to the District of Mission, there is no immediate risk of local flooding. However, it warned that there may be potentially dangerous debris flowing down the river.

Routine dyke assessments and inspections, dyke maintenance and other flood preparedness activities are being performed by staff, Mission said in an update Tuesday.
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The River Forecast Centre says that many gauge points are at or above historic flows for this early in the season. B.C. Public Safety Minister Mike Farnworth has called the river conditions a “one-in-100-year flood return.”

An emergency centre has been established in Surrey to brace for potential flooding, and sandbagging machines were delivered to help cities in their preparations.
Residents can get information on how to stay prepared through the government’s PreparedBC website.

It costs an extra $644,000 to build a detached home in Vancouver

It costs an extra $644,000 to build a detached home in Vancouver

Metro Vancouver is not only the city with the most expensive housing market in Canada, it’s also the most expensive place in which to build a new single-detached home.

The region could be made more affordable by addressing this issue, says national think-tank C.D. Howe, who released its new report, “Through the Roof: The High Cost Barriers to Building New Housing in Canadian Municipalities”, published on Tuesday.
Written by Ben Dachis and Vincent Thivierge, the report outlines the costs involved to build a detached home in metropolitan regions across the country.

The cost of building in Metro Vancouver comes out looking more expensive than any other region in Canada, just like the region’s home prices.

Two main metrics were evaluated in the report, the market price of housing, and the “Minimum Profitable Production Cost” (MPPC), in order to estimate the cost of barriers to home construction.
The MPPC was arrived at by taking construction costs, which were based on the value of building permits and the number of new single-detached units in different Census Metropolitan Areas (CMAs), as reported by Statistics Canada.

The cost of buying land was then factored in, and together multiplied by the margins developers earn as profit to produce the MPPC. Then, that metric was subtracted from the market price of housing.

The report found that the cost difference between the building construction cost per square foot and market price per square foot is close to zero, which is to be expected in a normally functioning municipal housing market.
In certain areas such as Abbotsford, B.C. and Vancouver, prices for single-detached houses exceeded the construction cost of new units by $150 per square foot or more. In Vancouver, the cost gap is $300 per square foot.

Bluntly put, the cost barrier to build a single-detached home in Vancouver is more than double what it is in any other region.
The report calculates an increase in cost-per-new-house of CAD$644,000 in Vancouver. That was double the costs in the next-closest metropolitan region: Abbotsford-Mission, where it was CAD$311,000.

Dachis said the report focused on single-detached homes, a form of housing that is already well out of reach for many living in Metro Vancouver — because calculations were trickier for townhomes and condos.

Regardless, the report provides a snapshot of how much it costs to build across the region. For instance, in Abbotsford, the cost to build is one of the lowest in the country, he noted. Even so, it still comes out with one of the highest costs to build in this study. There is lots of land available around Abbotsford, but it’s harder for developers to get access to it than it otherwise should be, said Dachis.
Dachis identified a few factors leading to land constraints that could be helping to drive up values.

One is development charges, known in B.C. as development cost charges (DCCs) — tools that allows regional districts and municipalities to collect money from developers that can offset costs related to increased demands on infrastructure.

The report urges local governments to reduce such charges, introduce user fees and let new residents pay for services through property taxes, such as area-specific ones.
Agricultural land is another factor, with the report noting that there are numerous municipalities with a high share of land previously zoned for agriculture that have higher housing costs.

For example, B.C.’s Agricultural Land Reserve (ALR) is a tool for protecting agricultural land — comprised of an area of 4.6 million hectares of land suitable for farming across the province.
Development is severely restricted on these lands, and in certain municipalities, like Richmond, there are concerns about the size of the homes being built on them and taking away the ability to farm some of the property.

Abbotsford comes with an abundance of agricultural land all around – so there is plenty of land available for development. Dachis feels that there has been much more focus on stifling demand than on creating more supply.
There are, however, still questions about how much adding new supply will help with affordability.
Non-resident owners, who are known to own property that’s valued higher than that possessed by residents, owned as much as 19 per cent of condos built between 2016 and 2017 in Vancouver, according to data from Stats Canada.

When asked how adding more supply can help with non-residents taking a higher and higher share of new condo units, Dachis said that as long as there is development potential, it does not matter what the demand is.

How much supply would be needed to adequately meet the demand? And what if units are being purchased and left empty?
At the end of the day, developers are in the business to make money, he says. If foreign buyers are willing to purchase homes as vehicles for investment, developers should be able to see the business opportunity that is there and continue to build.

Township of Langley issues evacuation alert as water levels rise

Township of Langley issues evacuation alert as water levels rise

An evacuation alert was issued by the Township of Langley on Tuesday for the unprotected floodplain areas of northwest Langley and Glen Valley, as well as Brae Island and McMillan Island.

According to the township’s website, the Mission Gauge reached 5.5 metres and said that current predictions indicated that water levels could rise to 6 metres by Friday and 6.6 metres by next week.

Warmer than normal temperatures across the province over the last several weeks have prompted the snowpack runoff for the Fraser River to arrive earlier than normal, the B.C. River Forecast Centre said.

The City of Surrey is also closely watching the Fraser River as water levels rise. Currently, over 500 lock blocks are being moved into place to protect homes and businesses in the low-lying Bridgeview neighbourhood near the Pattullo Bridge. The Barnston Island ferry is running as normal across the Fraser.

In the meantime, residents of B.C.’s Southern Interior are being told to prepare for round two. About 3,000 residents remain under an Evacuation Order as rising temperatures continue to accelerate the melting of high elevation snowpacks, said the Regional District of Kootenay Boundary.

It’s also expected that by mid-week, rivers will rise to levels close to those experienced last Thursday.
Grand Forks has already been hit especially hard, and property owners are still on high alert.
Mayor Frank Konrad expects the aftermath of the flooding to be much worse than the flooding itself. He said the city is going to need help from higher governments to rebuild.

The river forecast is predicting the next wave will hit in the coming days and there are fears this next round could be even worse.
The Similkameen River is projected to reach historic levels by Friday, which could push several feet of additional water back here into Osoyoos Lake. Crews are hard at work preparing for the worst. Over 100 properties have been evacuated in this area while another 600 are on alert.

Grand Forks, Rock Creek, and Osoyoos are holding community meetings to strategize and prepare.
Interior Health is warning residents about the serious health risks that can accompany major flooding events. Diseases such as E. coli and salmonella can be present in contaminated flood waters, and health officials always assume that this is the case, says Public Health Director Courtney Hesketh.

She warns that residents who get their source of water from wells are urged not to use the water until the system has been flushed and flood waters have receded. If possible, drinking water should be tested for bacteria first before consuming.
She also said wet drywall and silt can cause asthma, and in rare cases, black mould can be toxic.

April saw more home sellers than buyers in the Metro Vancouver* housing market.

April saw more home sellers than buyers in the Metro Vancouver* housing market.

Residential property sales in the region totaled 2,579 in April 2018, a 27.4 per cent decrease from the 3,553 sales recorded in April 2017, and a 2.5 per cent increase compared to March 2018 when 2,517 homes sold, according to the Real Estate Board of Greater Vancouver. Last month’s sales were 22.5 per cent below the 10-year April sales average.
Changing market conditions are evident, this is due in part to the new mortgage requirements implemented by the federal government which have diminished home buyer’s purchasing power.

A total of 5,820 detached, attached and apartment properties were newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in April 2018, representing an 18.6 per cent increase compared to the 4,907 homes listed in April 2017 and a 30.8 per cent increase compared to March 2018 when 4,450 homes were listed.

Currently, the number of properties listed for sale on the MLS® system in Metro Vancouver is 9,822, a 25.7 per cent increase compared to April 2017 (7,813) and a 17.2 per cent increase compared to March 2018 (8,380).

For April 2018, the sales-to-active listings ratio is 26.3 per cent for all property types. By property type, the ratio is 14.1 per cent for detached homes, 36.1 per cent for townhomes, and 46.7 per cent for condominiums.

Generally, downward pressure on home prices occurs when the ratio dips below the 12 per cent mark for a sustained period, according to analysts, while home prices often experience upward pressure when it surpasses 20 per cent over several months.
The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,092,000. This represents a 14.3 per cent increase over April 2017 and a 0.7 per cent increase compared to March 2018.
There were 807 sales of detached properties in April 2018, which was a 3.4 per cent decrease from the 1,211 detached sales recorded in April 2017. The benchmark price for detached properties is $1,605,800. This represents a 5.1 per cent increase from April 2017 and a 0.2 per cent decrease compared to March 2018.

Sales of apartment properties decreased 24 per cent from last year, reaching 1,308 in April 2018. The benchmark price of an apartment property is $701,000. This represents a 23.7 per cent increase from April 2017 and a 1.1 per cent increase compared to March 2018.
Sales of attached properties in April 2018 totaled 464, a 25.2 per cent decrease compared to the 620 sales in April 2017. The benchmark price of an attached unit is $854,200. This represents a 17.7 per cent increase from April 2017 and a 2.3 per cent increase compared to March 2018.

In the Fraser Valley, buying activity remained modest throughout the month of April despite a bump in inventory across all three major residential types.

The Fraser Valley Real Estate Board saw 1,708 sales across all property types in April 2018, a decrease of 23.4 per cent compared to the 2,230 sales in April of last year, and a 2.6 per cent increase compared to the 1,664 sales in March 2018.

Of those sales, 413 were townhomes and 498 were apartments, together making up 53 per cent of all transactions in April.
At the end of April 5,667 listings remained active, an increase of 18.2 per cent month over month, and 15.3 per cent when compared to April 2017.
3,429 new listings went up in April, a 19.7 per cent increase from March 2018’s 2,865 new listings, and a 16.2 per cent increase compared to April 2017.
The average number of days to sell an apartment in April was 14, and 16 for townhomes in the Fraser Valley region.
It took single family detached homes an average of 26 days on the market before selling.

HPI® Benchmark Price Activity
• Single Family Detached: At $1,009,200, the Benchmark price for a single family detached home in the Valley increased 0.8 per cent compared to March 2018, and 13.5 per cent compared to April 2017.
• Townhomes: At $549,900, the Benchmark price for a townhome in the Fraser Valley increased 1.5 per cent compared to March 2018, and 23 per cent compared to April 2017.
• Apartments: At $447,500, the Benchmark price for apartments/condos in the Fraser Valley increased 1.6 per cent compared to March 2018, and 45.8 per cent compared to April 2017.

Sales of Vancouver Houses hits 17-year low in April

Sales of Vancouver Houses hits 17-year low in April

Historically April has been a busy month for Vancouver real estate, but residential sales in the region have just hit the lowest level in 17 years.

Activity is slowing down as a result of a series of government measures designed to cool the housing market.
SFU Demographer Andy Yan says that this, in combination with stagnating wages and mounting consumer debt is at fault. Many consumers are opting to not purchase homes.
The British Columbia NDP minority government has the most aggressive policies when it comes to dampening housing sales in urban areas, he says.

Measures include raising the foreign-buyers tax from 15 to 20 per cent, while also expanding that tax beyond the Vancouver region.
In addition, the City of Vancouver has a tax on empty homes while Ottawa has a stress test that reduces the amount of money available to buyers hoping to enter an expensive housing market. What’s more, there are now higher mortgage rates.
The market is also being influenced by the provincial government’s plans for a speculation tax that would target out-of-province residents. The tax would be levied against properties that are left vacant, impacting those who pay little or no tax in B.C., according to industry experts.

The province also announced that its’ annual school tax will be increased, affecting the portion of the value of a property assessed above $3-million. Other notable tax measures include hiking the property transfer tax on the portion of a home’s sales price above $3-million.
Prices for detached homes in the Vancouver region weakened last month, while the condo market stayed hot.
There were 2,579 sales of detached houses, condos and townhomes last month, according to the Real Estate Board of Greater Vancouver, down 27.4 per cent from 3,553 transactions in April, 2017.

April marked the lowest level of total transactions of resale properties since 2001.

Detached home sales fell 33.4 per cent compared with a year earlier.

The average price of a detached property sold in April in Greater Vancouver was $1,658,958, down 6.1 per cent from $1,767,207 in the same month in 2017. Contrastingly, the average price of condos sold in the area reached $747,823, up 17.8 per cent year over year.
The overall benchmark price in Greater Vancouver in April for various housing types went up 0.7 per cent month over month and 14.3 per cent year over year.

One often overlooked factor is how the housing market has been fueled by the financial contributions of parents, says Andrew Ramlo, vice-president of market intelligence at Rennie Group. First time buyers are entering the market and purchasing homes with relatively low incomes.

Sales and prices have declined in the Vancouver detached housing market. Prices for condos and townhomes, however, have risen despite decreasing sales.

Mr. Ramlo thinks prices in the Vancouver region are unlikely to fall significantly, given that there are a large portion of long-time homeowners, aged 55 or older, with no mortgages or only small debts.
In the territory of the Fraser Valley Real Estate Board, which includes Surrey and Langley, a total of 1,708 sales occurred last month. This represents a 23.4-per-cent decline from the 2,230 transactions in April 2017.
Buyers are looking to the suburbs more than ever before. The average price of condos sold in the Fraser Valley region has risen 36.2 per cent over the past year to $417,688.