Canada

Thursday, December 5, 2019 - 14:04

MNI DATA IMPACT: Vancouver Homes 9X Income Underline BOC Worry


By Greg Quinn

OTTAWA (MNI) - Vancouver home prices are nine times the income of owners according to a government study, the kind of imbalance that has kept the BOC from cutting interest rates.

The city's median assessed property value of C$889,000 last year compares with income of C$92,600, according to a study published Thursday by Statistics Canada. That gap is greater than the ratio of 5.7 for Toronto and 3.1 in Ottawa.

--REBOUND

The BOC has held policy rates at a G7 high 1.75% this year, in large part because of concerns about re-igniting a housing boom in Vancouver and Toronto that has led to a rise in heavily indebted households.

There are already signs housing is on the rebound again after regulators stepped in to curb speculation, Deputy Governor Tim Lane said in a speech today, with some of those gains coming along with rising population and incomes.

Canadian house prices increased 69% between 2007 and 2017 while median income rose by 28%, Statistics Canada said in the report.

The boom has turned home ownership into a "pipedream" for half of younger buyers, a separate KPMG report published Thursday found. Two in five of those surveyed for KPMG said the price of their home will fall in the future.

--VALUE

The imbalances are even more intense in central Vancouver, where the home price to income ratio is 13. Life is more affordable on the east coast with a ratio of 2.4 in downtown Halifax, Nova Scotia.

People who have bought homes tend to be more established financially, suggesting a lower risk to the financial system. "Income of residential property owners was considerably higher than the income of those who did not own," and families tend to be older married couples, the report found.

The price to income ratio isn't a complete picture of affordability. The study doesn't capture things such as a family's wealth or cases where today's assessed price is much higher than a residence that may have been purchased decades ago. On the other hand, assessed home values can lag market prices.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

[TOPICS: MACDS$,M$C$$$]

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