Is the Real Estate Affordability Crisis Contributing Toward Record Low Sales?
The British Columbia real estate affordability crisis is resulting in the lowest sales in decades. This may be due to the limited usable land available. A contributing factor propelling this anomaly may be the limited usable land available in BC’s lower mainland. In addition, strong international influence, particularly from wealthy Chinese investors, is potentially propping up real estate value as they hold larger properties and speculative agricultural land. These factors, combined with traditional metrics influencing real estate, including interest rates and the health of the Canadian economy, could be leading to an affordability crisis for many BC residents.
As an example, sales of all home types in Chilliwack and District Real Estate Board (CADREB) were down a third from 303 in March 2018 to 209 in March 2019, as reported by Paul Henderson of the Chilliwack Progress.
Although the slumping sales should represent a reduction in pricing, value has apparently remained steady.
A 2016 report by the Canada Mortgage and Housing Corporation explains that, “low interest rates, robust population and employment growth, limited housing supply and the proximity of protected areas collectively known as the Agricultural Land Reserve,” are factors in the pricing of Vancouver region real estate. The report goes on to mention that “although the extent to which wealthy foreign buyers/capital have impacted home prices is still unclear, [it] is widely believed to be [a] factor.”
A proposed solution to the affordability crisis is densification through subdividing larger lots.
In a recent article published by the Abbotsford News, Abbotsford Mayor Henry Braun mentions that, “densification, I think for the average citizen, is a great idea,” alluding to the fact that there is strong support for the movement. He concludes the statement by mentioning that “[it’s] a great idea until it’s right next door.” Braun goes on to explain that densification is an inevitability, citing that the one constant he has experienced throughout his 60-plus year tenure living in Abbotsford, is that more people continue to live closer together.
Densification may also be an opportunity for property owners in fast-growing municipalities to subdivide their large lots and take advantage of the steady real estate market. Densification has traditionally made properties more affordable for those looking to buy a home. There are also an abundance of investors ready to take on subdividing projects through the Fraser Valley’s Finpedient platform, which helps connect land and real estate developers, construction companies, and others seeking more direct and expedient financing options with investors. The application was launched on April 2nd, 2019, and is now accepting registrations.
