Housing affordability in Vancouver is now the worst ever recorded in a major Canadian city.
The ongoing impact of excessive land-use regulation and policies that allow foreign elites to buy property without even living in Canada continue to take a toll on housing affordability.
According to an RBC analysis, housing is now more unaffordable than at anytime since 1990.
“While the deterioration of affordability conditions was broadly based across the country, it was developments in Vancouver Toronto and Victoria that had the greatest impact on the national scene,” said Craig Wright, Senior Vice-President and Chief Economist at RBC. “These three markets were the only ones with affordability measures exceeding the national average.”
Additionally, “The Vancouver area experienced the sharpest affordability drop among Canada’s major markets, reaching a new record high for the measure for any market in Canada at 87.5 per cent (up from 82.6 per cent in the second quarter). Meanwhile in Toronto, the affordability measure rose for the 13th consecutive quarter to a record-high 78.4 per cent for the area (up from 77.1 per cent in the second quarter).”
Housing affordability fell in every major Canadian market except for Saint John.
With multiple interest rate hikes expected in 2018, the affordability problem will get even worse.
A big part of this problem is government policy, two policies in particularly. Land use restrictions to prevent ‘sprawl,’ – which is absurd in a country with massive amounts of land – has artificially restricted supply, meaning prices have increased.
The second harmful policy has been letting foreign elites buy up housing without living in the country. This has driven up the price of housing even beyond the level caused by land use restrictions – especially in a few of the most expensive markets.
As a result, even in cheaper markets, there has been increased demand from those pushed out of areas where affordability drops rapidly. All of this feeds into an overall decline of affordability, in a process that doesn’t seem to be stopping anytime soon – since those misguided policies aren’t changing.
Because of this, Canada continues to get closer and closer to a serious economic downturn, or even a crisis, especially when we consider the rise of household debt.