Nearly three-quarters of single-family detached houses in the Vancouver region had assessed values of at least $1-million last summer, sharply higher than in mid-2015, as the affordability crisis worsens.
The proportion of detached houses in Metro Vancouver assessed for $1-million or more reached 73 per cent on July 1, 2017, according to a new analysis by Andy Yan, director of Simon Fraser University's city program. He conducted his study based on BC Assessment's fresh data released last week and historical statistics.
In his previous report released in 2016, Mr. Yan found that 43 per cent of detached properties in Metro Vancouver had assessed values of at least $1-million on July 1, 2015, compared with 28 per cent in mid-2014 and 23 per cent in mid-2013. On Monday, he released his latest regional findings, showing that the proportion of $1-million-plus valuations rose to 66 per cent on July 1, 2016, before hitting 73 per cent in mid-2017.
"There is evidence of sprawl as people try to attain a detached home," Mr. Yan said in an interview. "It's the sprawl of $1-million homes outside of core municipalities that we used to think of – outside of the City of Vancouver and the District of West Vancouver. This sprawl presents profound challenges when it comes to housing affordability."
The B.C. government introduced a 15-per-cent tax on foreign buyers in Metro Vancouver in August, 2016. After real estate prices decreased in the autumn of 2016, the market for detached houses began rebounding in early 2017 while prices for condos and townhouses surged as buyers flocked to less-expensive multifamily units.
Industry experts say prices for houses in some neighbourhoods in the City of Vancouver today are lower than the highs in the first spring of 2016, before the foreign-buyers tax took effect in August that year.
Still, as Mr. Yan's analysis shows, the percentage of homes in the $1-million club has continued to grow regionally.
From mid-2016 to mid-2017, for instance, the proportion of detached properties assessed for at least $1-million climbed from 19 per cent to 34 per cent in Port Coquitlam; 36 per cent to 51 per cent in Surrey; 76 per cent to 83 per cent in Coquitlam; 84 per cent to 90 per cent in Port Moody; and 93 per cent to 97 per cent in Richmond. The proportion slipped slightly in the City of Vancouver from 99.7 per cent to 99.4 per cent.
Mr. Yan said despite the dip in properties with $1-million-plus assessments in Vancouver, any single-family listing within the city's boundaries today that appears to be a steal at less than $1-million will have issues – a teardown, located on a busy street, situated on a smaller lot and/or have some problem related to location.
The $1-million home used to signify "upper crust" back in mid-2005, when an estimated 11 per cent of single-family houses within Vancouver's city limits were assessed at $1-million or higher. "Given this latest set of BC Assessment numbers and the direction that things are going, the $1-million house could go from being upper crust to eventually the whole loaf in Metro Vancouver," Mr. Yan said, adding that less-expensive properties in the suburbs aren't necessarily bargains when factoring in transportation costs.
He said the suburbs are playing catch-up in entering the pricing stratosphere, roughly three years after the proportion of detached properties within the City of Vancouver assessed for at least $1-million hit 65 per cent in mid-2014, before exceeding 99 per cent in BC Assessment's data for mid-2016 and mid-2017.
Bryan Yu, deputy chief economist at Central 1 Credit Union, said in a research note last week that it remains to be seen whether various government measures to cool off the housing market will work, but he is forecasting a reduced number of transactions compared with late 2017.
"Tightening of mortgage qualification criteria and deceleration in economic growth this year will slow home sales by up to 10 per cent in the first quarter as fewer buyers qualify for financing and recast their housing expectations lower. Adding to this is a creep up in mortgage rates," Mr. Yu said.
He predicts that despite the slowdown in sales volume, benchmark prices for various housing types could rise 6 per cent this year, bolstered by what has been a hot market for condos, including in the suburbs.
The price for detached houses sold in the Real Estate Board of Greater Vancouver's territory last month averaged $1,749,766, up 4.4 per cent from the same month in 2016, the board said. Greater Vancouver accounts for a large part of Metro Vancouver.
In Surrey, which is part of the Fraser Valley Real Estate Board's territory, the average price for detached houses sold last month was $1,111,419, up 9.3 per cent from a year earlier.