Normal is a relative term at the best of times. However, were you to ask any Vancouver realtor or developer if they could have predicted market prices on homes today, the answer would almost certainly be no.
According to the Vancouver Courier, members of the real estate community learned some astonishing statistics about housing affordability in Metro Vancouver last week.
This all took place during an annual presentation made by the Urban Development Institute. It was hosted by Michael Ferreira of Urban Analytics, a firm that advises developers on what to build and charge on new developments.
Most of the guests were shocked by what Ferreira referred to as “the new normal.” While instant sellouts, bidding wars, and house flipping aren’t exactly news to Vancouver realtors, attendees were still surprised by the scope of price increases across the region.
“Between 2015 and 2017, the average price of a Metrotown high-rise apartment increased from $700 to $1,100 per square foot. Surrey apartments increased from $330 to $550 per square foot. Richmond apartments increased from $490 to $790 per square foot. This was just over a two-year period.”
The conundrum has been a frustrating one for prospective home buyers, who find themselves facing intense competition for any property under one million dollars.
“In today’s market, that is mostly condos and townhouses,” says Vancouver Realtor Ariane Benjamin, who specializes in selling townhouses and duplexes. “It’s no surprise to find a brand new 475 square foot condo selling upwards of $700,000, even in more affordable neighborhoods like Mount Pleasant.”
Land prices are at least part of the reason, according to Ferreira. Just as meat is priced by the kilo, home prices are based on the square foot cost of buildable area. This means neighbourhoods that are fully developed and have limited supply of space will keep increasing in price. For example, current prices for land on the West Side are now $650-$750 per square foot.
“This translates into a land cost of $637,500 for an 850-square-foot apartment,” says Ariane. “Add in costs for construction, materials, and labour and you could be looking at a final purchase price of almost one million dollars.”
Although neither Vancouver realtors nor developers can predict where prices will go in the future, Ferreira does not expect growth to continue at the same rate. He advocates speeding up the legislation and approval processes associated construction to ease the rising cost of homes and help bring some relief to home buyers.