Vancouver holds the dubious distinction of having the least affordable housing in Canada.
As of January 6, 2022, the average single-family home price was $1.91 million, a 23% increase; the average townhome was priced at $1 million, also a 23% increase; condo apartments averaged $762,000, a 13% increase. (Increases are year-over-year.)
If that’s not enough, Vancouver is the second least affordable housing market of 92 major markets worldwide, as measured by the Demographia International Housing Affordability report.
Wipe that smirk off your face, Toronto. You’re the second least affordable market in Canada, and the fifth least affordable in the world.
Markets of 1,000,000-plus population are rated in Australia, Canada, Hong Kong, Ireland, New Zealand, Singapore, the United Kingdom and the United States.
“Most international housing affordability evaluations are at the national level, but Demographia focuses at the major housing market level within nations because differences between housing markets in a country can be substantial,” says the report’s author, Wendell Cox.
“Sometimes housing affordability is evaluated simply by comparing house prices. Between markets, however, housing affordability requires consideration of both house prices and incomes. Housing affordability is house prices in relation to incomes. Demographia International Housing Affordability uses the median multiple to rate middle-income housing affordability.”
The median multiple (MM) is a price-to-income ratio of the median house price divided by the gross median household income, a standard used by many institutions, from the World Bank to the Joint Center for Housing Studies at Harvard University and others.
The MM ratio is the cost of a home, divided by the annual income, with the resulting number being the number of years it would take to pay off the home, assuming all income is devoted to paying down the cost of the home.
The lower the ratio, the higher the affordability. Demographia identifies four levels of affordability: Affordable (3.0 and less), moderately affordable (3.1 to 4.0), seriously unaffordable (4.1 to 5.0) and severely unaffordable (5.1 and over).
By measuring middle incomes and house prices, the influence of higher income and luxury housing is eliminated, says Cox.
“The affordability issue is particularly critical due to the strong increase in remote working during the pandemic which is accelerating the movement to more affordable places,” he says. “It will likely also help flatten or even reduce prices in the highest-cost housing markets as other households seek less costly housing elsewhere.”
The US has 13 of the most affordable housing markets, including the only markets measured and designated as affordable: Pittsburgh (2.5), Rochester NY (2.6), Buffalo N.Y. (2.9), St. Louis MO (3.0)
Six Canadian cities are measured by Demographia: Edmonton (3.8), Calgary (4.1), Ottawa-Gatineau (5.2), Montreal (5.6), Toronto (9.9), Vancouver (13).
In answer to the question on your mind, Hong Kong, at 20.7, is the least affordable housing market in the world, as measured by Demographia. The top five are rounded out by Sydney, Australia (11.8) and Auckland, New Zealand (10.0)
The home pictured for this column was listed for $11 million, but that needs some context. The home is worthless; it’s all about the land. The lot, in trendy Vancouver Westside, is 6,539 sq. ft. and, combined with two adjacent lots, after the homes are demolished, will be home to a mid-rise apartment building of no less than 13 storeys.
With the average condo price, Vancouver Westside at $1,210 per square foot, the developer buying the land would need to build and sell roughly five 2,000-sq.-ft. apartments just to cover the cost of the lots. However, making some assumptions based on the potential footprint of the new building, assuming the adjacent lots are the same size as this one, approximately 250, 2,000-sq.-ft. apartments could be built.
That would be a gross return of $605 million on the potential $33 million investment, assuming each lot is the same size and each sells for $11 million.
Myke Thomas is a Western Standard contributor. He has a wealth of media background, working in radio, television and most recently as the real estate columnist, reporter and editor at the Calgary Sun for 22 years.