Is the Canadian dream of home ownership beyond the grasp for the majority of the next generation in the Lower Mainland?
According to a study by Vancity Savings, the answer is likely yes, particularly in terms of the Metro region. And the Valley isn’t immune from rocketing real estate prices.
The report, which examined housing prices from Langley westward, suggests that city will be the only “affordable” community for real estate in Metro Vancouver.
It projects the average home price in Vancouver will exceed $2.1 million by 2030 and require more than 100 per cent of the average household income to pay the mortgage!
In 1988, I bought my first house with my partner at the time, for the grand sum of about $65,000. It was an older two-bedroom bungalow in Chilliwack, with a big back yard and a workshop, situated in a quiet, green neighbourhood. The only thing missing was a picket fence.
I was 31 years old, had saved a down payment, and received some help from my parents.
Less than five years later, the place sold for more than twice its purchase price.
My next house, in Surrey, was triple the initial value of the first. One more move up the real estate ladder and 15 years later, my wife and I sold our mortgage-free home that had nearly doubled in value again, and moved to Abbotsford.
It’s not an uncommon scenario for plenty of people my age, but I fear my daughter and most others in her generation will not be so fortunate.
The value of my first home wouldn’t have been too far beyond twice my annual salary at the time. With the addition of a second income, the then-moderate mortgage was quite comfortable.
Yet, as the years rolled by, housing prices steadily outpaced even double incomes.
It took careful budgeting and spending discipline, but it was still doable.
The key was getting in at an affordable price and taking advantage of the mounting equity.
However, even the most prudent fiscal management seems hopeless when placed in the context of current real estate trends.
Never mind the $2 million for a home in Vancouver. That’s simply insane.
According to Stats Canada, the median family income in this city in 2012 was about $66,000. The average detached home in Abbotsford was nearly $450,000 last year.
That’s still manageable for a couple with secure, decent-paying jobs, but barely. For a single person, it’s not attainable.
And the future doesn’t look good.
Vancity recommends a limit of about 30 per cent of household income to service mortgage debt.
Burnaby, Richmond and White Rock had house debt service ratios of around 30 per cent in the early 2000s, the Vancity report says, but that hit 46 per cent in 2014 and is projected to rise to between 60 and 70 per cent in 2030.
Surrey’s ratio is projected to climb from 39 to 48 per cent in 2030 and Langley Township’s would rise from 35 to 43 per cent.
Here in the Valley, the pressures ease somewhat, but the question, of course, is for how long. Urban growth is inexorably pushing eastward, and so are people from the urban Metro area, seeking “affordable” real estate.
This country has also been enjoying rock-bottom mortgage rates for a considerably long time. When those begin to inch up, as one imagines they eventually must, traditional home ownership will become, as Vancity says, “a scarce luxury.”
It’s a fundamental change to what my generation and those that preceded it have largely taken for granted – a good job, a family, and a comfortable house which you can truly call your own.
I wouldn’t be a fan of what seems will be the future for most.
Your home is your (rented) castle.
