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Vancouver ranked No. 2 globally for unaffordable homes


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Ok, when is the Vancouver Housing Market going to crash? Not soon according to this article.

from CTV:

TORONTO -- Vancouver is the second most unaffordable housing market in the world after Hong Kong, according to a new study of major property markets.

That could spell trouble for homeowners if mortgage rates rise, economists say.

"Given how high house prices are relative to household incomes, you'd only have to see a moderate increase in mortgage rates to have a really huge hit to affordability," said David Madani, Canada economist at Capital Economics.

PDF: 11th Annual Demographia International Housing Affordability Survey: 2015

The annual Demographia International Housing Affordability Survey ranks real estate markets in Canada, the United States, Australia, China, Ireland, Japan, New Zealand, Singapore and the United Kingdom.

The survey calculates affordability by comparing median house prices with median incomes -- the higher home prices relative to incomes, the more unaffordable the market.

Cities like Vancouver and Toronto, where house prices are significantly higher than incomes, would be hit hardest by a spike in mortgage interest rates, Madani said. Many homeowners could find themselves struggling to make monthly payments.

In Vancouver, median home prices were 10.6 times higher than median incomes in 2014. That's the worst affordability ranking Vancouver has ever received in the survey's 11-year history, and an increase from 2013 when prices were about the 10.3 times higher than incomes.

In Toronto, median home prices were about 6.5 times higher than median incomes last year.

A report released Monday by TD Economics said even a mortgage increase of two percentage points could cause financial hardship among Greater Toronto Area homeowners, pushing up the number of residents who devote 30 per cent of their income to mortgage payments to 20 per cent from 16 per cent.

Although Vancouver was the only Canadian city that made it to the Top 10 list, housing markets in Toronto, as well as in Victoria, Kelowna and the Fraser Valley in B.C., were also ranked as unaffordable by the Demographia study.

The report blames Ontario's urban containment policy, a development plan that strives to prevent urban sprawl, for Toronto's swelling home prices.

Meanwhile, Moncton, N.B., was ranked Canada's most affordable market.

Fredericton and Saint John, N.B., Windsor, Ont., and Charlottetown were also ranked as affordable places to buy homes.

Overall, the study ranks Canada as "seriously unaffordable," with home prices in major urban markets about 4.3 times higher than incomes, while for Canadian real estate markets overall, median home prices are 3.9 times median incomes.

The Bank of Canada had been expected to raise its trend-setting interest rate, which has been at one per cent for more than four years, this fall. Economists now say that's unlikely, given that the collapse in the price of oil is likely to stunt economic growth.

However, Madani says even if the central bank remains in a "holding pattern," Canadian mortgage rates could rise in response to economic recovery south of the border and policy actions from the U.S. Federal Reserve.

"We can expect the U.S. Federal Reserve to soon begin to raise interest rates, and with that we expect to see rising U.S. Treasury yields," Madani said. "On that basis, we have been expecting long-term interest rates in Canada to go up.

Read more: http://www.ctvnews.ca/canada/vancouver-ranked-no-2-globally-for-unaffordable-homes-1.2197177#ixzz3PPxPpBI3

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Blame the government and free capitalism and not the folks who take advantage of the system.

I think if most Canadians were rich like them they would do the same thing if they had the opportunity and chance.

This Capitalism you speak of. Where exactly does it exist?

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I have a household income of $130,000 and we can barely afford a house in Langley.

Wife and I make roughly the same. Live near Winnipeg. Half acre property, house we bought brand new 10 years ago. 6 years left on our mortgage. She's originally from BC, but doesn't miss living there at all.

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Just paying rent for a room in an apartment building that's about 30 years old with one bedroom is almost $1000 per month.

Depending on where you are in Vancouver, it is more than $1000 per month. Certainly the case for Vancouver west. It's crazy.

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We all know that Vancouver is expensive but I don't think its any more expensive than San Francisco, Seattle, L.A. or San Diego, when comparing apples to apples.

Where Vancouver comes off bad is the comparatively pitiful average wages and higher cost of everything besides housing.

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If mortgage rates rise by even 1/2 a percent, the price of housing in the lower mainland will crash into the ground.

How do do you figure? Not sure about anyone else, but I have my mortgage rate locked in. Also, considering how low the rates are now, they would have to climb by around 1.5% to match what they were a few years ago.

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This is one of those things you already know but don't like to hear again. My roommate and I are able to pay the bills, but not much room for anything else.

I might have to move back in with my parents soon... or move over east. NS/NB might be good.

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