Vancouver’s housing crisis: No, not like before, and not like anywhere else (except Hong Kong)
Try discussing Vancouver’s affordability crisis with enough baby boomers and you’ll probably encounter two corrosive falsehoods.
The first states that Vancouver might be unaffordable, but it’s been like this before. The second states that even if Vancouver has become particularly unaffordable recently, other “world-class” cities are being hit to the same degree everywhere, and Vancouverites should get used to it, because it’s the new normal.
For full effect, these sage observations are best delivered with a worldly sigh. Maybe a kindly pat on the head.
The problem is that both positions betray a disregard for facts that is either woefully ignorant or wilfully self-serving.
Not like before
Vancouver has only experienced two major price spikes in the past 40 years even remotely comparable to what we see now, peaking in 1981 and 1995. In adjusted-dollar terms, prices were about the same in both those years and in 2005. In adjusted terms, median household incomes were C$61,700 in 1981, C$52,000 in 1995 and C$57,000 in 2005.
In other words, using 2005 as a baseline, our hastily devised affordability index was 9.6 per cent higher in 1995. It was 7.6 per cent lower in 1981. (Prices were adjusted in 2008 dollars and incomes in 2011 dollars; applying different-year dollar adjustments to either will produce different index numbers - but the percentage differences won’t vary).
Let’s apply those differences to Demographia’s 2005 unaffordability multiple of 5.3, in order to estimate comparable figures. It might be rough maths, but it’s extremely instructive. We produce estimates of 4.9 for 1981, and 5.8 for 1995.
Unaffordability has soared since 2005. It’s 10.6 now, remember? So comparing the current situation with even the darkest days of 1981 and 1995 is ridiculous. Things are now far, far worse, regardless of what unsympathetic boomers might conjure from their foggy memory banks.
(This refers only to price : income; I make no judgement about the catastrophic impact of 20+ per cent interest rates in 1981).
Not like everywhere else
As for the second myth, that the current spike in unaffordability is similarly transforming other hedge cities – think New York, Sydney, London, San Francisco - well, that’s rubbish too, at least in terms of Vancouver’s recent scale.
The situation ought to be clear to any reasonable person, boomer or millennial: Vancouver’s real estate market is now a world-class freak show.
There is only one other major city that has experienced a concurrent unaffordability hike comparable to Vancouver’s. And it’s not just comparable – it’s virtually identical. That city is Hong Kong.
It’s true that other cities may have experienced similar spikes in unaffordability - but at different times. Pointing these out misses the point, which is to try to establish commonality by finding similar situations at similar times.
Of course, factors other than Chinese wealth flows are probably at play in Vancouver. But have any had a similarly isolated impact on Hong Kong, Vancouver’s unaffordability doppelganger?
[*Update: This story has been updated to include a link to the latest Demographia study and to describe its scope]
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The Hongcouver blog is devoted to the hybrid culture of its namesake cities: Hong Kong and Vancouver. All story ideas and comments are welcome. Connect with me by email [email protected] or on Twitter, @ianjamesyoung70.