It is often said and stated that Vancouver is one of the most expensive cities in the world to live in. Most findings place Vancouver as the third most expensive city in the world. Being generally interested in real estate, I sought to find out why and how much it would cost to own a home in Vancouver, and I was completely baffled by the numbers.
Image source : Flickr / Kenny Louie https://www.flickr.com/photos/kwl/4733576208/
The 2017 Demographia International Housing Affordability Survey gives Vancouver a rating of 11.8, meaning median home prices are 11.8 times higher than median household income(Hayward, 2017). I found out that between 1983 and 2016, the cost of a typical home purchase in Vancouver rose from $101,921 to $786500. Most family houses jumped 30% to 50% in value from July 2015 – July 2016. So what is the catalyst driving these prices to the stratosphere?
This surge of prices is attributed to a number of factors. One is the influx of foreign buyers. Vancouver’s real estate market has felt the impact of foreign money, and in particular, rich foreigners. One of the biggest contributors to this rise is foreigners arrive with great wealth, and continue to earn high incomes outside Canada.
Shadow flipping is also responsible for driving the real estate prices off the roof. Shadow flipping is a clause or document that allows the current registered buyer of a property to sell their interest in the property to another interested buyer(king, 2016). That is, the realtor can find another second buyer for the property every before the first sale closes, who will be willing to pay a higher amount. In most cases, the realtor is normally the first buyer. This is essentially fraud, but the assignment sale allows it.
I also found out that the bar of entry into the real estate market in Vancouver is very low, and thus most real estate agents have been able to make their way into the real estate market and this lowers the level of compliance to regulations.
Residents are not only being pushed to the suburbs but to other cities as well. Even those that earn very decent incomes are pessimistic about their present or future ability to buy homes in Vancouver. For those currently sitting on the sidelines, the gnawing fear of getting shut out grows more intensely as prices climb, and some take the plunge and buy homes they cannot afford no matter the cost.
Some of the measures the government can take to cool down the real estate market and stabilize it would be to increase property taxes for foreign investors and tax them at business rates. The government should also impose heavy fines and suspensions for unscrupulous realtors involved in fraud.
Ref links :
Vancouver realtor says board needs to be transparent on shady dealings
Why is Vancouver’s real estate so expensive?
How Canada’s real estate market went completely insane
Vancouver’s real estate market is the third most expensive in the world : Survey
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