Scarce condo supply in Metro Vancouver squeezes would-be buyers from market
'It's very hard. It's not an obtainable goal anymore,' says young, potential buyer
Raluca Bumbac and her partner are both working professionals, but they've given up hope of buying a condo in Metro Vancouver.
"It's very hard. It's not an obtainable goal anymore," said Bumbac, 26, who works in the biomedical industry.
She said after searching for more than a year, and losing out on places, she stopped trying. She lives at home with her parents.
Bumbac is not alone in her condo search. The high demand for detached homes that occurred in Metro Vancouver in 2016 has been replaced this year by a rising demand for condos and townhomes, said Jill Oudil, president of the Real Estate Board of Greater Vancouver.
"Demand has been increasing for months and supply is not keeping pace," Oudil said. As a result, prices are climbing, pushing out potential buyers like Bumbac.
"This dynamic is causing prices to increase and making multiple-offer scenarios the norm." said Oudil.
The benchmark price for an apartment has risen in Metro Vancouver from $475,000 in April 2016 to just over $554,000 in April 2017.
Experts blame the higher condo prices on a lack of new housing projects and government incentives such as the B.C. Home Owner Mortgage and Equity Partnership Program, which is aimed at helping first-time home buyers and has added new buyers to an already overheated market.
Do incentives drive up prices?
Tom Davidoff, an associate professor of urban economics at the University of British Columbia, said just as the housing market was starting to cool off, the introduction of the home-buyers program — which helps first-time home buyers with a loan of up to 5 per cent of the purchase price — propped up the market and helped drive up prices.
Encouraging more demand seems like it's a gift to the buyer, but it's largely a gift to the seller- Tom Davidoff, UBC associate professor
"It's hard for me to believe that that program has not had any impact on prices," Davidoff said.
"People can buy who didn't used to be able to, and when you introduce new buyers in, or encourage people to buy more because debt is cheaper, that's got to have an impact on prices," said Davidoff.
According to the Ministry Responsible for Housing, 1,288 applications for the first-time home buyers program have been approved as of May 11, with 20.5 per cent of them approved for Metro Vancouver properties.
Real estate agent Steve Saretsky said bidding wars on condos are becoming a common occurrence, with 44 per cent of condo sales in Vancouver West in April selling over the asking price.
"It's a lot of first-time buyers, a lot of local investors that are trying to get into that condo market and, you know, it's really what people can afford, and so I think that everybody just has this kind of get-in mentality right now and that's really what's driving things," said Saretsky.
Multiple offers are propelling the prices of condos. For instance the 421-square-foot, one bedroom condo on Howe Street, pictured below, was listed for sale at $399,000, but sold for $53,000 above the asking price.
Meanwhile, a one-bedroom apartment in Kitsilano was listed at $509,000, but sold for $61,000 over the asking price.
Seller's market for condos
The Real Estate Board of Greater Vancouver says the condominium market has now become the most competitive since it started measuring the market in 2005.
A seller's market usually starts when 20 per cent of available properties listed are being sold within a 30-day period, and in April, that number shot up to 82 per cent.
Davidoff said if the market is going to cool off, municipalities and the provincial government must limit incentives like the first-time home buyers program, increase the supply of multi-family housing, and increase property taxes for real-estate investors.
As for Bumbac, she says her search will continue, but she may have to look outside the region for an entry-level home.