The price of residential real estate in the City of Vancouver continues to increase at a staggering rate. This is especially true for single family homes; figures released by the Real Estate Board of Greater Vancouver for February 2016 show a 27% year-over-year increase for single detached home prices in Metro Vancouver. Theories to explain the craziness of this market abound, with pundits typically pointing to historically low interest rates, a relatively small land base and the effect of foreign capital as all hurting affordability.
Other more unusual theories are floating around, as well (for example, some blame profits from the illegal sale of marijuana for increasing prices). Falling somewhere between these typical and more outlandish theories is the “vacancy theory”, which posits that a vast number of single family homes in Vancouver have been purchased solely as investment properties and sit vacant, reducing the housing stock and driving up prices.
The City of Vancouver released a report last month which should finally lay to rest the vacancy theory, at least with respect to single family homes, duplexes and row-housing units. By studying BC Hydro smart meter data from 2002 to 2014, the City’s consultant was able to determine that the vacancy rate for single family, duplex and row-housing units in the City between 2002 and 2014 was just 1%. Accordingly, vacancy rates were very low and stable during this period of skyrocketing prices.
Perhaps unsurprisingly, the report identified significantly greater vacancy rates for condominium housing units (7.2% in 2014). Local media seized on this when the report was published, noting the problem of there being so many vacant condominiums at a time when the residential rental vacancy rate is close to 0%. Although this observation may resonate with many, the fact remains that it seems quite unlikely that these vacancies are playing a major role in driving up condominium prices. Between 2002 and 2014, condominium prices did not increase at anywhere close to the rate of increase for single family home prices.
A copy of the City’s report can be found here: http://council.vancouver.ca/20160308/documents/rr1EcotagiousReport.pdf