As a Realtor in Vancouver, I chat with a lot of new buyers and curious friends about Vancouver Real Estate. One of the most common conversations is about affordability and why we have the highest prices in Canada, but also – how can people afford Vancouver Real Estate??
Foreign Buyers are a big story here on the Pacific Coast, with the general consensus that they are driving up the price of homes thanks to their seemingly unlimited budgets and interest in our limited real estate inventory. There are a lot of foreign buyers (though no direct stats on the numbers) who seem to be particularly interested in new developments in Vancouver (both condos and houses). However, there are other factors that lead to the higher real estate prices here, than compared to any other city in Canada (though Toronto is a close second). Other factors in our high home prices include, but are not limited to, an ever increasing population from within Canada and elsewhere, world class amenities, limited land to expand into thanks to the surrounding ocean, previously established neighbourhoods, etc.
With high prices (the highest in Canada), how can people afford Vancouver Real Estate?
One of the Biggest trends I’m seeing is wealth distribution, meaning our parents are helping us buy! Whether as a gift or as an investment, financial help from parents is very common these days. As I see it, there are two reasons behind this:
1. Our parents are downsizing, so once they sell their current property – that has likely gained quite a bit of equity over the years – they will have some extra funds to help their kids enter the real estate market. In the last few years, I’ve helped quite a few new buyers who have received either the down payment or the entire purchase amount from their parents, bypassing a mortgage completely. Something else to consider with this scenario is that it leads to three real estate transactions: the sale of your parents homes, their purchase and your purchase. That is a lot of activity for the Vancouver Real Estate market.
2. Many new buyers are also getting money from their grandparents, via their parents. When our grandparents pass, they often leave a large inheritance which can include property that has gained significant value and lots of savings (unionized jobs and good pensions helped!). These savings are often passed on to their children, who are often pretty financially comfortable themselves, which means they can pass on some of the inheritance to their kids to get their foot in the door.
Many Buyers these days also have enough money to put down more than 20%, thereby foregoing the need for mortgage insurance and giving Buyers decent equity right away.
There are a lot of Buyers, with high purchasing power, and with these still low interest rates, it’s only making it easier for people to enter the real estate market. It’s the Spring Market, which is always the most active few months in Real Estate, and with the continued interest from Buyers, we’re seeing a lot of action. I do expect things to slow down slightly (multiple offers are happening too often right now) but not by much. Send us a message or give me a call if you want to chat about this further – I always love talking Real Estate.