Vancouver housing market in ‘full-blown crisis,’ says RBC
Posted April 3, 2024 6:48 am.
Last Updated April 3, 2024 7:03 am.
There’s more proof Wednesday morning that home ownership may never become a reality for some people looking to put down roots in Vancouver. A new report from one of the country’s big banks shows a harsh reality that underscores the city’s housing crisis.
The Royal Bank of Canada describes the housing market in Vancouver as being in a “full-blown crisis.”
Listen to CityNews 1130 LIVE now!The bank says it has never been so expensive to buy a home anywhere in the country than it was in Vancouver during the last quarter. The bank explains people need just over 106 per cent of their median income just to cover the cost of buying a home.
“This significantly narrows the potential pool of buyers in the market, keeping activity soft and prices flat recently. We see little change from this in the months ahead,” said RBC Economist Robert Hogue.
Things aren’t much better in Victoria, with people in B.C.’s capital needing to spend 80 per cent of their income to buy a home.
“Under our base case scenario, the share of an average household income needed to cover ownership costs would only fall to mid-2022 levels by 2025. That would scarcely lower the bar for most potential buyers. Meaningfully restoring affordability will likely take years in many of Canada’s large markets,” added Hogue.
RBC says high interest rates, which the Bank of Canada starting hiking in March 2022, have weighed heavily on the market, which is one reason why demand in the market has cooled.
“We estimate they’ve shrunk the maximum budget for a household with a median income ($85,400 at the end of 2023) by 22 per cent since the first quarter of 2022 to just under $500,000 (assuming a 20 per cent down payment and 25-year amortization period). Home prices, meanwhile, have fallen just 1.8 per cent over the same interval,” explained Hogue.
(Courtesy RBC)
The big bank says recovery will be tempered as the central bank is expected to lower interest rates over the summer.
“We expect lower borrowing costs will restore some of the massive losses during the pandemic. Any improvement over the coming year, though, is poised to be modest and leave budget-constrained buyers wanting,” Hogue stressed.
The overall outlook remains grim, however, with the bank saying it could take years for things to improve.
“Under our base case scenario, the share of an average household income needed to cover ownership costs would only fall to mid-2022 levels by 2025. That would scarcely lower the bar for most potential buyers. Meaningfully restoring affordability will likely take years in many of Canada’s large markets.”
Housing a hot topic in B.C.
For years housing has been a problem in B.C. and ahead of this fall’s provincial election, Premier David Eby and his NDP cabinet continue to make a number of housing-related announcements to try and get things under control.
On Tuesday, Eby and Housing Minister Ravi Kahlon announced proposed amendments to the Residential Tenancy Act to help crack down on “unfair” evictions. The province also said it was going to work faster to help resolve rental disputes.
Last year, the provincial government brought in a number of legislations to calm the expensive market. It restricted short-term rentals, relaxed restrictive building permitting processes, and is working to increase density around major transit hubs.
Meanwhile, a report from Rentals.ca and Urbanination released last month showed the average rent in B.C. was $2,481. In January, the Canadian Mortgage and Housing Corporation (CMHC) found Vancouver remains the most expensive place to rent in the country.
It found the average monthly rent for a two-bedroom purpose-built apartment was $2,181 last year. A two-bedroom condo apartment was $2,580, on average.
