Way back in June of last year, we showed you 13 cities where millennials have no hope of affording a home. They included Seattle, Boston, New York, Washington DC, San Jose, San Diego, San Francisco, and Los Angeles.
“The bad news is that the areas that often most appeal to young adults are also the ones where homeownership is the most out of reach,” Bloomberg remarked at the time before quoting one 28-year-old with a graduate degree as saying the following: “I’m making a good salary and I’m doing all these things that I’m supposed to be doing. But you’re just not able to save enough to get to that number. Housing is so inflated.”
Yes, “housing is so inflated” in certain areas not the least of which is Vancouver where prices have gone full-retard. As we wrote early last month, “residential property sales in Greater Vancouver rose 31.7% in January, 46% above the 10-year sales average for the first month of the year and the second highest January ever according to the Greater Vancouver Real Estate Board.”
The benchmark price for a detached home in Vancouver: $1,293,700. The benchmark price for an apartment: $456,600.
That’s led to all sorts of ridiculous aberrations including the now famous shack-like “fixer upper” that sold for $2,500,000 in Point Grey. “Hot doesn’t quite describe Vancouver’s three-alarm fire of a housing market,” Bank of Montreal chief economist Doug Porter remarked, underscoring the madness.
New data out today from the Canadian Real Estate Association shows the average price of a home in Canada rose an astonishing 16% Y/Y to more than $500,000. Underscoring the extent to which British Columbia and Ontario are driving the market, stripping out those two provinces pulls the national average down to under $300,000. Here’s a look at the province-by-province breakdown:
And here’s city-by-city:
“The number of single family home sales above one million dollars is rising in Greater Vancouver and the GTA,” Gregory Klump CREA’s chief economist said. “If recent trends continue, home sales above $1 million will account for a greater share of activity and will further fuel year-over-year average price increases in these markets.”
We also remarked last month on Canada’s growing tech industry and how it’s affected property prices in Waterloo, Ontario known as “Canada’s Silicon Valley.” The population in Waterloo is only 140,000, but the city has two universities and a Google office. As for the real estate market, it’s “lightning in a bottle” to quote Google’s country manager for Canada. “The buzz has created a ‘land grab’ and now, condos are renting for nearly C$2,000 per month while one-bedroom units are selling for more than a quarter of a million dollars,” we said.
Well now, in a story that combines all three themes mentioned above (millennials, Vancouver housing, and Canada’s tech economy), we learn that housing as become so expensive in Vancouver that millennials are simply moving away, threatening the city’s burgeoning tech culture.
Meet Kevin Oke, co-founder of LlamaZoo Interactive and former Vancouver resident.
“Housing in Vancouver is insane — it was insane when I left and it’s more insane now,” Oke told Bloomberg. “If you’re trying to do the startup thing full-time, it would have been really difficult with all the expenses.”
Indeed, Kevin.
“Oke, now 33, is part of the millennial retreat from a city where housing prices have skyrocketed at a faster pace than even in San Francisco, another North American technology locus,” Bloomberg writes. “Rising costs are putting Vancouver’s vaunted growth engine at risk as the city hemorrhages people employed in tech and new media for more affordable locales, including Victoria and Kelowna. The flight of millennials from Vancouver is similar to trends found in other cities with soaring home prices.”
According to Statistics Canada, Vancouver added only 884 net new people age 18-24 last year. That’s the lowest level on record. The net number of those age 25-44 fell 1,300, the most since 2007 which, you might recall, is the year the country experienced a commercial paper crisis that in many was a canary in the coal mine ahead of the the US housing meltdown.
“We’re banging our heads on the wall,” Christine Duhaime, founder and executive director of the Digital Finance Institute says. “Why aren’t they staying?”
“Because it’s too expensive,” she says, answering her own question. “Vancouver is going to lose its tech edge.” Here’s the insanity graphed:
And while the millennials fleeing rising home prices in Vancouver are flocking to the likes of Victoria and Kelowna, we’ve got a better idea for those who are feeling priced out of the market: Calgary, where the death of Canada’s oil patch has literally driven prices into the ground:
Of course you’ll have to deal with rising property crime, higher suicide rates, and soaring foodbank usage, but hey, you can’t have it all.
Normally, these things have a way of sorting themselves out. People get fed up, they leave, demand falls, supply rises, and prices adjust. Only there’s an x-factor here: China. Where thanks to expectations of a much deeper yuan devaluation, investors are moving their money out of the country to “safer” havens – like Canadian real estate.
So get ready Kevin, because as long as the PBoC can’t figure out how to manage a controlled devaluation, the bubble you’re seeing in Vancouver and Toronto will spread and when it does, you better hope you bought instead of rented.
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Bonus: Here are some excerpts from “Without Affordable Housing, Vancouver Risks Becoming An Economic Ghost Town,” by Ryan Holmes, CEO of HootSuite, is an angel investor and advisor, and mentors startups and entrepreneurs as originally published in The Financial Post:
The tech economy in Vancouver and across Canada has never looked brighter.
But there’s one enormous cloud looming on the horizon — housing affordability. It’s no secret that Vancouver housing is increasingly unaffordable. (The same goes for Toronto, to a slightly lesser extent.)
An influx of global capital has affected the local real real estate market, though that’s far from the sole cause. The population of Metro Vancouver is growing at a clip of roughly 30,000 residents each year, fueled primarily by immigration from abroad. Low-cost borrowing and fast-rising home values have driven purchases for investments, rather than as a place to live. And Vancouver’s geography — hemmed in by mountains and ocean, with limited space for development — is only compounding the issue.
The consequence of this is impossible to overlook. Unaffordability is emptying Vancouver of one of its most valuable assets — young people who grew up in the city and who are invested in it. As well, qualified newcomers who could bring talent, drive and vision to Vancouver are looking elsewhere. The projected closure of more than a dozen Vancouver public schools hints at the scale of the problem: Families can no longer afford to live here.
This is worrying for several reasons, chief among them that it makes it exceptionally hard to grow a business in Vancouver. I’ve experienced this firsthand at my company, but it’s hardly unique to the technology sector.
This lack of affordable housing has reached a crisis point. Vancouver risks becoming an economic ghost town: a city with no viable economy, other than a service industry catering to wealthy residents and tourists.
Today, the city consists of a few square kilometres of high-rises in a tiny downtown core, hemmed in by a sea of single-family homes. This approach to urban development no longer makes sense.
Yet, conversations at the highest levels have been noticeably lacking. Vancouver desperately needs all government stakeholders — local, provincial and federal — to come to the table and begin the search for solutions in earnest.
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