KENNETH CHAN (DAILY HIVE) - New data shows home buyers in Metro Vancouver are still willing to pay for the premium of being within close walking distance from a SkyTrain station.
While there is currently an aversion to public transit, the health crisis has only had a minimal effect on buyers’ willingness to pay for the above-assessed value for an apartment, according to real estate marketing and analytics firm Roomvu.
For every kilometre away from the closest station, buyers are likely to pay 0.61% less over assessed value in the initial COVID period (March 15 to May 30) — down slightly from 0.63% in the pre-COVID period (January 1 to March 14).
“There was a strong relationship between the distance from the closest transit location and the percentage differences between sales price and assessed value,” reads the report.
“The result clearly indicates that apartment units close to the stations are still being sold at a premium over their assessed values in the post-COVID lockdown period.”
The distance penalty per km from the closest station is highest for Burnaby North (+3.7%), followed by Burnaby South (+2.1%), Vancouver East (+1.9%), New Westminster (+1.3%), Vancouver West (+0.7%), North Surrey (+0.1%), and Richmond (-0.3%).
“It looks like access to transit got more valuable over the course of time,” said Thomas Davidoff, economics and professor at UBC’s Sauder School of Business, in a statement.
“Prices of transit-friendly homes rose over the course of the year in spite of the far-reaching negative economic consequences of the pandemic.”
On average across the region, most apartments sold are priced above their assessed value, with the final sales prices for these homes at 4.4% above the assessed value, with buyers willing to 4.6% above assessed values during COVID compared to 4.3% before the pandemic.
NICHOLA SAMINATHER (THOMSON REUTERS) — Bank of Canada Governor Tiff Macklem’s reassurance that interest rates will remain low for at least two years could unleash a wave of speculative demand in the country’s hottest housing markets, realtors and mortgage brokers warned.
Canadian authorities are hoping a raft of stimulus measures and decade-low interest rates will spur credit growth and housing investment, helping offset the economic hit from the coronavirus pandemic and oil prices hovering near multi-year lows.
“If you’ve got a mortgage, or you’re considering to make a major purchase … you can be confident that interest rates will be low for a long time,” Macklem told reporters after the central bank held rates steady on Wednesday.
That comment could boost housing demand in an economy with an unemployment rate close to the highest in decades and consumer insolvencies expected to spike in coming months, brokers said.
“In a country engaged in the most spectacular stimulus program … the suggestion that everybody should run out and buy a house or a car is a bit much,” said Ron Butler of Toronto-based Butler Mortgage. His office saw record inquiries this week even before Macklem’s statement.
Macklem’s comments on Wednesday also seemingly put the central bank at odds with the government’s mortgage agency, which last month tightened mortgage insurance rules for riskier borrowers to help curtail “excessive demand and unsustainable house price growth.”
In an emailed response on Thursday to a Reuters request for comment, Macklem said the Bank of Canada had highlighted that high household debt levels were a vulnerability but that the priority now was supporting a recovery and the return of jobs, which also ensures borrowers are able to pay their mortgages.
Supporting the recovery and reducing the vulnerability of high debt levels are “entirely aligned,” he said.
STIMULUS BLURS ECONOMIC PICTURE
Evan Siddall, chief executive of the Canada Mortgage and Housing Agency, tweeted on Thursday that low rates and stricter underwriting could co-exist.
“Surely you can reconcile the need for low rates to stimulate borrowing by people with strong credit characteristics with a policy that restrains excessive borrowing by those with weaker credit characteristics,” he said.
But unprecedented levels of government stimulus have made borrowers’ true economic status less clear, Butler said.
Canadian home sales rebounded sharply in May and June following the weakest April on record, data from the Canadian Real Estate Association showed. In Toronto, Canada’s biggest city, home prices jumped nearly 12 per cent in June from a year earlier.
The average sale price in June for all home types was $930,869 in Toronto and $1.03 million in Vancouver.
Government support — worth about $230 billion (US$170 billion), according to the Department of Finance — and loan deferrals by banks have bolstered home prices, and pushed expected declines toward the end of this year or early 2021, said Nathan Janzen, senior economist at Royal Bank of Canada.
“Then we will see the true health of household balance sheets,” he said.
People buying properties could now find themselves with negative equity in their homes if those declines materialize, said Vancouver-based Oakwyn Realty agent Steve Saretsky.
CMHC last month forecast home price declines of between 9 per cent and 18 per cent over the next 12 months.
“If you buy a home today, you have to be extremely confident in your work situation,” Saretsky said. “I don’t think you have a free market when you have mortgage deferrals and unlimited quantitative easing and $2,000 (unemployment) checks.”
John Pasalis, president of Realosophy Realty, said that while it was normal for central banks to encourage borrowing during economic downturns, Macklem’s explicit message to take on mortgages would likely encourage speculative buying.
“When investors dominate the market, prices get inflated beyond where they should be,” he said.
Home prices in Vancouver haven't gone down because people affected by COVID couldn't afford them to start with
Benchmark price for homes has stayed static; though rents have decreased
JUSTIN MCELROY (CBC NEWS) - COVID-19 has changed elements of living in Metro Vancouver in so many ways, from transportation to the economy to drug and liquor policy.
But the price of buying a home? Well, some things stay the same.
"There is a little bit of disconnect right now," said Central 1 deputy chief economist Bryan Yu.
Even with unemployment in B.C. at 13 per cent and a forecast GDP reduction of 7.8 per cent this year, the benchmark price of a property in Greater Vancouver has essentially remained constant — going from $1.02 million in February to $1.03 million in May.
While there's evidence on sites like Craigslist that the price of rentals has dropped in the last three months, Yu said that the ownership market has stayed static and could even see a slight uptick when official numbers are released next week for June.
He believes one key reason is that people most impacted by the economic downturn weren't players in Vancouver's housing market to begin with.
"Whether it's the accommodation sector or restaurant services ... the economic impact has predominantly hit the lower end of the income spectrum," said Yu.
"For higher income individuals still in the market, it's likely they were still in the market. They were able to work or stay at home, in some cases able to save money."
Troubles on horizon?
At the same time, Yu said Vancouver's real estate sector couldn't stay impervious to COVID-19 forever.
"As we move forward into the fall, there's going to be a little more pressure," he said, adding that lower immigration would also have an affect.
"The economy itself is not strong. It's going to be quite weak as we go forward."
On Monday, the Canada Mortgage and Housing Corporation released a housing outlook, forecasting the lower range for the average home price in Metro Vancouver would fall from $892,790 in 2020 to $809,215 by 2022.
"Average house prices will decline with weaker household budgets and the uncertain nature of the economic reopening," wrote CHMC senior analyst Braden Batch and senior specialist Eric Bond.
However, they also said Vancouver's "ownership markets are less exposed" to COVID-19, compared to the rental market.
"Real estate buyers tend to be older than renters. Therefore, they are less likely to have lost their employment as a result of the economic shutdown," they wrote.
The provincial government announced a host of housing policies in 2018 and 2019 — and have put in emergency COVID-19 measures to help protect renters — they have no immediate intention to make further changes.
Finance Minister Carole James says the government will be closely monitoring the situation.
"We're going to watch the housing market," said James.
"With COVID, there have been mixed results … but still a great challenge, so we're continuing on with our measures, and not letting up from making sure we look at affordable housing for people."
As COVID-19 dramatically slowed down public hearings and new staff reports, municipalities saw their housing plans effectively frozen, but that is beginning to change. The City of Vancouver is considering a new policy that would create rental tenure zoning in arterial streets across the city, in exchange for six-storey buildings for stratas, instead of the current four.
A public hearing is expected in July, and Housing Minister Selina Robinson is excited by the development.
"Local governments have been cautious, but we're starting to see more pick up," she said.
"During COVID, things changed in terms of acting on new things, but I'm really pleased to see the activity pick up. It means that local governments recognize we still need to be recognizing housing affordability."
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