BMO Capital Markets reported recently that "The averaged Priced Home in Vancouver is now 11.2 times family income, more than double the ratio of a decade ago." And "it is a market that is subject to an elevated risk of a correction." hinting that we are in a bubble and that prices could collapse at any time.
This statement is partly true. Let me explain further. Like many things, what makes this comment true boils down to the 80/20 rule. 20% of high priced homes in the lower mainland are skewing the statistics and it is important to remember that it is only the most desirable areas in the lower mainland that are now what I would classify as no longer affordable.
News reporters feed on statements like the one made by BMO and it makes the job of a real estate agent more challenging than needed.
As a comparison, imagine if two car dealerships moved into Vancouver. One dealership only sold Farraris and the other only sold Hondas. The average price for the cars in the Farrari lot sell for $500,000 and the average price for the Honda lot is $30,000. Therefore the average price for a car in town is $265,000. This is simply not an accurate statement
Take out the sales of homes priced over $1,000,000 and the actual price of a detached home is closer $600,000 and the average price of a condominium is around $315,000.
These findings come from a recent study from Vancouver-based Urban Futures which uses Landcor Data figures. The study breaks down the sales data into five quintiles representing equal sales in price brackets from the highest to lowest. Considering the top quintile (or top 20% of sales by value), which ranged up to $17,500,000, the average single family price was a lofty $1,690,000, twice the average price for all sales. The remaining 80% (where the typical buyer is found) the average price was $591,000 or 27% below the overall average price.
For condominiums, when factoring in the upper quintile the comparison is $904,000 vs $311,000
The reality is that the average buyer can still find relatively affordable homes with detached prices at under $650,000 and condo prices at about half of that price. The Real Estate Board of Greater Vancouver notes that the one in every five homes sold this year for less than $350,000.
Vancouver home prices are the highest in Canada, but for the majority of buyers they are far below what most media suggests.