Tuesday’s provincial budget focused a lot on housing, and in particular the sorry state of the current housing market for first-time homebuyers and tenants.
In Langley, housing prices have risen enormously in recent years. A recent Times story pointed out that the price of detached houses rose by 88.3 per cent in five years. The average price of a detached house is now $1,130,799 and the average price of a townhouse is $480,178. A condominium unit is worth on average $378,437.
It is safe to say that most working people cannot afford a mortgage on a detached house with that price tag – unless they have built up a massive amount of equity with a previous home. Some of the price increases have been due to a shortage of supply, and some are due to low interest rates, but a huge factor in prices rising all across the Lower Mainland has been the higher and higher prices that a very small segment of buyers are willing to pay.
In Langley, the supply of housing has never been greater. Particularly in Willoughby, housing is being built at a rapid rate. Much of that housing is multi-family – either townhouse or condo – and relatively lower prices (as compared to other areas of the Lower Mainland) have kept demand high.
Interest rates, after a long period at very low levels, are starting to rise a little bit. Each boost, however small, keeps more people out of the market. More stringent rules about down payments and additional stress tests are keeping other potential buyers out of the market.
The provincial government has no control over interest rates. It can help boost supply – mainly by leaning on municipalities to move faster on building permits. There was no hint of that in Tuesday’s budget.
Much of the government’s focus is on the few home buyers who have had an outsized and damaging impact on markets. The foreign buyers’ tax is being raised to 20 per cent, and expanded to include the Fraser Valley, Capital, Nanaimo and Central Okanagan regional districts. All of these areas have seen an influx of buyers since the former government brought in a foreign buyers’ tax in Metro Vancouver in 2016.
The government is also bringing in a speculation tax and higher taxes on existing homeowners with homes worth $3 million or more. It is making a number of moves to clearly identify the beneficial owners of homes, and is also changing rules around condominium presales, which have been a source of much speculation and no taxation. Finance Minister Carole James said the government wants to identify who the true owners of properties are.
All of these measures should help to reduce speculation in the real estate market. It is long overdue that all levels of government know who actually owns homes and other properties – in order for good public policy to be formulated, proper taxes to be paid and homes to be more readily available for people who want to live in B.C. and work and pay taxes here.
None of these measures are likely to significantly reduce housing prices. There has already been a significant inflow of outside capital into the Metro Vancouver real estate market, which has become (as James said) “a stock market.”
It is unlikely that any of these measures will cause capital which is already here to flee. Home prices, particularly for detached homes, have been more static in recent months and will likely fall somewhat. They will still be out of reach for most buyers. It is very unlikely that the prices of townhouses and condos in Langley will fall significantly for some time – given the demand.
The finance minister did have some good news for renters. There will be additional subsidies for some renters with low incomes, and there will be a concerted effort to build 34,000 housing units – many of them social housing or co-ops. The biggest challenge in the rental market is the same as in the home buyers’ market – supply.
Local governments need to do everything they can to speed up the development process, and at the same time they need to be mindful of people who depend on low-income housing, and ensure that the supply of rental apartments, mobile homes and other sources of low-cost housing is not reduced as a result of redevelopment.
Frank Bucholtz is a retired editor-turned political blogger. His thoughts on issues affecting the South Fraser region can be found on his Frankly Speaking blog.