Vancity’s latest report, “Downsizing the Canadian dream: homeownership realities for Millennials and beyond,” includes an eyebrow-raising calculation for the Vancouver housing market:
If current market trends continue, the average detached home in Vancouver will cost more than $2.1 million by 2030 — requiring more than 100 per cent of the median household income to maintain.
And that figure assumes a rise in income of 2.5 per cent a year. Indeed, in the past 15 years, the percentage of income required to maintain a home in the city has risen to almost 76 per cent from a low of 42 per cent in 2002.
This despite the fact that the Canada Mortgage and Housing Corporation says housing costs should not exceed 32 per cent of a homeowner’s gross monthly income. So, what are would-be Vancouver homebuyers to do? One option is to look at the “vastly more affordable” condo market.
The average price of Vancouver condo is $407,550, which requires 30.6 per cent of the median household income to maintain. But, as Vancity points out, many would view a condo as a “starter home” — the first stop on the way to the ultimate goal of upgrading to a home that is more family-friendly. However, since 2005, condo values have only increased by 43 per cent, while the average property has increased by more than 126 per cent.
“This shows that the jump up from a condo will soon be out of reach, with many condo owners finding themselves financially stuck in their starter,” the report reads.
And so, for an increasingly large number of people, the search extends outside the city limits.
“Homes in other cities in Metro Vancouver are more affordable, but not as much as some would hope,” the report continues. “Comparison between cities shows that the percentage of income required to maintain a home in other cities has also been trending upwards over the past 15 years.”
If Millennials wish to own a detached home, Vancity says, the cities of Maple Ridge, New Westminster, Pitt Meadows, Port Coquitlam and Langley are key target areas. The average home price to income ratio in these municipalities is currently hovering between 31 per cent and 32 per cent. However, if current trends continue, even this will not last.
What’s the solution? The report recommends a number of policy changes to combat the affordability crisis, including a change in zoning policies to allow for more density, maximizing incentives for developers to build affordable housing stock, improving transit connections between Vancouver and the suburbs, and designing growth centres with dense cores tied to mass transit. For more, the full report can be seen here.