The problem with using averages is they can look terrific on the way up and horrible on the way down. Remember all that talk about the ‘average’ Vancouver house now being worth $1 million? One year later it’s apparently worth $735,315. What will it be worth next year?
The average home price in Canada in April was up 0.9 per cent from a year ago at $375,810.
“It bears repeating that the national average price was skewed higher last spring by record level high-end home sales in Vancouver’s priciest neighbourhoods, and that a replay of this phenomenon was not expected this year,” said Gregory Klump, CREA’s chief economist.
Sales in Canada’s largest markets are having opposite effects on the national average, with slowing sales in Vancouver dragging, and soaring sales and prices in Toronto exerting upward pressure.
The average selling price in Vancouver was down 9.8 per cent compared with a year ago at $735,315, while the average price in Toronto was up 8.4 per cent at $517,556.
Take the house price and divide it by what it costs to rent for a year to get the price-to-rent ratio: Price divided by (Monthly rent x 12) = X.
(Estimates for additional costs of homeownership, such as taxes, maintenance and insurance are factored into the equation.)
If the number is higher than 15, it’s generally not a good time to buy.
If the ratio is less than 15, buying is a better deal than renting, if you plan on living there for at least five years to offset moving and closing costs.
By the time the number hits 20, renting is apparently the way to go, except if buyers expect to stay put for at least 15 years, according to a formula used by trulia.com to rank major urban U.S. centres every year.
B.C.’s numbers, as shown in the graphic, are through the roof, from 29 (Prince George) to 73 (West Vancouver).
Compare that to a few little housing markets like Manhattan (20) and San Francisco (17). That ratio doesn’t mean house prices are <i>low</i> it just means that they’re more reasonably priced compared to rents.
Since you can’t take on a big loan to pay rent it tends to show how much a place is actully worth in terms of desirability and local economics.
Both sales and prices are down at the top end even more markedly than in the rest of the region, which has also seen a general slowdown this spring.
A house on the 3000 block of West 24th Anenue, first listed at near $4.5-million six months ago, sold on April 15 for $3.35-million.
Fresh statistics from the Greater Vancouver Real Estate Board show the number of sales on the west side is down by nearly 40 per cent for the first four months of the year. Only a third of the nearly 400 homes listed in April have sold – one of the lowest rates in the region.
Realtors say the slowdown appears to have resulted from a combination of tighter lending practices by local banks, which now want proof of income to service large mortgages, more restrictions on how much capital can be taken out of China, and fewer immigrants.
“Banks are now requiring borrowers to disclose incomes and assets before mortgages are approved, as of the last six weeks,” said west-side realtor Marty Pospischil, who specializes in selling single-family homes owned by long-term residents. Last year, he says 90 per cent of his 100 house sales were to “offshore buyers” – people not living here yet, who flew in to buy. This year, it’s less than a tenth of that. “We’re now seeing a 50-per-cent collapse rate in deals, when it’s usually more like 5 per cent,” he said.