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Vancouver’s population is growing by about 37,000 people a year, so a condominium will remain the only affordable housing option for a lot of people.Ben Nelms/Bloomberg

Derek Hynes was thinking like a lot of Vancouverites when he purchased his one-bedroom condo in one of Surrey's new towers. He thought its value would rise each year, enough to make the purchase an investment in his future. He'd build equity until he had enough to purchase a bigger place, maybe even the down payment on a house.

The expectation that every home should build equity is a hangover from the pre-2008 years, when it seemed that real estate had nowhere to go but up, up, up. Average income earners were purchasing presale units and flipping them by the time they were completed, pocketing $50,000 or so in the process. Those days are long over. A shift is underway. As many condo owners who purchased five years ago and are trying to sell today can attest, the equity simply did not materialize. They are often breaking even, or selling for slightly more or less. Today, a condo in Vancouver is no longer viewed as a winning investment, so much as affordable housing and forced savings plan.

And if you consider that mortgage payments are still higher than those in Toronto, condos aren't even that affordable. A recently released real estate report on Canadian cities says: "Despite the 2012 drop in Vancouver's median condominium price and a further decline expected in 2013, the area's affordability is forecast to remain the weakest by far among this report's eight cities, both this year and throughout the forecast."

The report, released by the Conference Board of Canada and Genworth Canada, also says that interest and principal payments on the median condo in Vancouver last year were a full 20 per cent more than payments in Toronto. For that reason, Mr. Hynes, who's become a father since he purchased his 620 sq. ft. condo, will rent out his condo and use the money to rent another place, in an area with better value. Mr. Hynes paid $182,000 for his condo, which was $7,000 below the asking price. He was thinking of selling the unit until he saw that his neighbour on the same floor, with the same suite, has just listed for $179,000.

"I thought it would at least keep its value, so I'm surprised," Mr. Hynes says. "If it had kept its value, I definitely would have sold right now."

He says his work colleagues, friends and relatives are facing the same situation. His cousin just sold her condo after renting it out for five years, and she lost money on it.

"It was for the exact same reason I'm losing out," Mr. Hynes says. "Because there are so many condos in the area."

There are too many new condos. Since the economic slump of 2009, condo starts have been on the rise, and above the 20-year average ratio of starts-to-population growth. Developments were going up almost as if it were 2007 again.

"This left the inventory of completed but unsold apartment condominiums very high by the past decade's standards," says the Genworth/Conference Board of Canada report, which provided those numbers.

With the slump in prices, sales have recently picked up. The benchmark price of an apartment decreased 1.1 per cent from August, 2012, to $366,100 in August this year, according to the Real Estate Board of Greater Vancouver. Sales last month went up 40 per cent over August, 2012.

"Even though the real estate market is booming, the prices mostly remain the same," says Vadim Marusin, who's the founder of, a new real estate search engine that maps the Multiple Listing Service listings and uses colour coding to provide data on education, minority group visibility, education level, income levels, crime, violent crime, schools, daycares, transit and climate in neighbourhoods throughout the Lower Mainland. Want to live among people with a high percentage of university degrees? He's got the map that will show you. Such neighbourhood profiling might sound cold, but it makes sense in a city that's more often treated as a land bank than a community.

"If we are talking about Metro Vancouver, the hottest areas are Richmond downtown, Vancouver downtown, and Vancouver west, mostly large low-rises," Mr. Marusin says.

Urban Analytics' Michael Ferreira tracks the market on a quarterly basis, and he sees a condo glut that's softening prices.

"We've seen the unsold inventory of product under construction increase steadily over the last year," he said, seated in a coffee shop with several cranes working in the distance. "Not to the point of concern for oversupply, but certainly to the point where buyer urgency is not as great."

Because buyers know there is another building coming up, they aren't pressured to buy, adds Urban Analytics' analyst Jon Bennest.

"In some markets where there's a lot of supply and not as much demand, it's hard to say that we'll see a price increase. In others where there is less supply and consistent demand, we do see those areas increasing. So it's very specific to the submarket," says Mr. Bennest.

"Areas we see flatlining or stabilizing would be Langley and Cloverdale, for example, where you have quite a bit of supply in that market. There is a continual supply base that will make it hard for prices to come up."

Long-time commercial development analyst Richard Wozny of Site Economics, says that condo equity growth may remain a slow hill to climb.

"After six years of low interest rates and high population growth, the annual value increase was still far less than 1 per cent," he says. "Owners require rising prices to offset costs associated with mortgage payments, interest rates, property taxes, monthly operating fees, the lack of liquidity, possible vacancy and building depreciation. However, more than 340,000 new condo units – 10,000 per year – are being planned in the Metro Growth strategy.

"Massive new supply, coupled with higher interest rates should continue to keep average condo prices from rising faster than inflation."

With the city population steadily growing by about 37,000 people a year, the condo will remain the only affordable housing option for a lot of people. And the people with real equity – foreign investors and local boomers – will continue to look to them for investment.

"A lot of people have built equity over time, and have more buying power, and that is what allows our market somehow to keep going, despite the prices," says Mr. Ferreira.

With condo starts expected to stay low in comparison to the previous decade, and demand expected to rise, condo inventories should become more sustainable, the Conference Board of Canada report says. With the drop in listings and a sales increase in the forecast, prices should slightly rise between 2014 and 2017.

Mr. Hynes says he'll hang onto his condo long enough to see that happen.

"I'm in a situation where I cannot afford to sell it, so I'm going to be renting it out, probably next month.

"For me, it feels as if I am moving backward in life, but I have no choice, because I need to move on because I have a family now. I am going to move out and go rent a basement suite in Coquitlam.

"I know a lot of people can't afford their mortgages because there are tons of cheap basement suites in Coquitlam."

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