Category Archives: Provincial Housing Market

The Changing Faces of Greater Vancouver Neighbourhoods

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The following article is written by Grant Woolliams, a Vancouver Realtor with RE/MAX Crest Realty (Westside) who specializes in East Vancouver, the Westside of Vancouver, and Downtown homes.  You can visit his website at www.grantwoolliams.ca.

Sometimes the only thing that seems to stay the same in our world is the fact that everything always changes.  This certainly appears to be true for Greater Vancouver.

Which areas will see the most drastic change over the next 10 or 15 years?  Hard to say, but let’s explore a few areas that won’t be the same for too long.

The Cambie Corridor

In August of 2009, the Canada Line sky train opened and on May 9th, 2011 the City of Vancouver council approved the Cambie Corridor Plan.  With this plan both the allowable height and floor space ratio (FSR) of buildings were increased, especially at transit hubs.  As the allowable height was raised to between 6 and 12 stories along most of Cambie Street, the area plan does not concentrate density exclusively around stations, but rather supports a more evenly distributed density.  However, the largest change will occur at transit hubs such as Oakridge, which will undergo huge change, and the intersection of Marine and Cambie.  At Marine and Cambie alone there are several very large upcoming projects such as Marine Gateway by PCI, Cambie & Marine by Intracorp, and a possible development on the northwest corner of this intersection.

Southeast False Creek

When most Vancouverites think of development in False Creek, they think of the Olympic Village which is now known as the Village on False Creek.  However, there is much more happening in the area.  The False Creek area east of Cambie Street, including much of the False Creek Flats area, has some major, major developments coming soon or already completed.  These include Central by Onni, Lido by Bosa, The Maynards Block by Aquilini, Proximity and Opsal Steel by Bastion, James and Meccanica by Cressey, and Pinnacle Living 1 and 2 by Pinnacle International just to name a few! The area has waterfront, excellent views, close proximity to downtown, and will never be the same!

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Toronto Land Transfer Tax to be eliminated by 2015

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Exciting news for home buyers in Toronto as city mayor Rob Ford announced in an interview with CP24, that land transfer tax in Toronto would be reduced in 2012 as per the promise he made in his election campaign. Further to this, he promised the land transfer tax would be completely eliminated by 2015.[i]

The Toronto land transfer tax, which was first introduced in 2008, is applied to all property purchases in the City of Toronto, with a full or partial rebate offered to first-time home buyers.

 “I can’t say we will wipe it all out this year, but we are going to do it piece by piece and you will see a portion of the land transfer tax gone by next year.” – Mayor Rob Ford

According to the Toronto Star, the land transfer tax could be reduced next year by as much as 25%.[ii] This news couldn’t have come at a better time as Toronto home prices hit a new record last month. The average house price in Toronto is now $481,305, a 2.1 per cent increase from October, even though actual home sales declined 10 per cent.

This news came as a surprise to many since last year the mayor appeared less committed to his election promise..[iii]

Plugging the current average Toronto home price into RateHub’s land transfer tax calculator, we see that the amount of land transfer tax owed is close to $3750, meaning a savings of several thousand dollars to home buyers when this tax is eliminated.

Value of Toronto Home

Toronto Land Transfer Tax

$200,000

$1,725

481,305

$3,753

$600,000

$7,725

 

Given the savings to be had, there may be some home buyers who will hold out until at least 2012 to make a property purchase.

Housing Purchase Power Parity: Halifax

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The theory of Purchase Power Parity (PPP) states that goods should cost the same in different countries when you factor in the exchange rate. The Big Mac Index (PPP) was developed in the 1980’s to measure the value of different currencies, based on the common “good”, the Big Mac hamburger. As an example, if it costs $5 (USD) to purchase the famous treat in the US, then converting it to CDN dollars should buy us the same burger in Canada.1

If you’ve been following along with us during our little economics experiment, you are already aware of our RH Index, which we use to measure Canadian housing markets to determine its value. We’ve substituted Big Mac burgers for “Big Mac” homes. Our hamburger home is defined as a two-story, detached, three-bedroom, two-bathroom property.2

Let’s hit the fertile harbours of Nova Scotia and visit Halifax:

MLS®: 40389504, $290,000

Housing Purchase Power Parity

Notes

You can find this property in the middle of downtown Halifax, facing the harbour and only a short drive away from universities.

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Housing Purchase Power Parity: Saskatoon

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Purchase power parity (PPP) is a theory of economics that determines the value of goods in different countries – measured against the exchange rate. The modern derivative of this theorem is called the Big Mac Index (PPP) and it is quite ingenious. This index measures the price of the famous McDonalds hamburger in different countries and factors in the exchange rate to determine if a particular currency is under or over-valued. They use Big Mac sandwiches because it is product that remains relatively consistent across different countries.1

If you’ve been following along with us during our little economics experiment, you are already aware of our RH Index, which we use to measure Canadian housing markets to determine its value. We’ve substituted Big Mac burgers for “Big Mac” homes. Our hamburger home is defined as a two-story, detached, three-bedroom, two-bathroom property.2

Our experiment takes us to the province of Saskatchewan, where we will measure the housing situation in Saskatoon. Have a look at what we’ve found:

MLS®: 405601, $334,900

Housing Purchase Parity

Notes

This property is very central, located close to Saskatoon City Hospital, Midtown Plaza Mall, and Kinsmen Park.

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Housing Purchase Power Parity: Montreal

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Housing Purchase Power Parity: Montreal

There is a famous economics theory known as Purchase Power Parity (PPP) and in the 1980s, the publication “The Economist” released their own variation of this theory, called the Big Mac Index1. This theory revealed the value of Big Mac sandwiches in different countries, and factored in the exchange rate to determine if a particular currency was over or under valued.

We’ve developed our own version of the Big Mac PPP, which we use to examine the housing landscape of Canadian cities. We call our theory the “RH INDEX”. Rather than reveal the value of currencies using standard Big Mac hamburgers, we choose to expose the value of Canadian housing markets using standard homes. Our “Big Mac” home is a two-story, detached, three-bedroom, two-bathroom property.2

The next city on our tour is Montreal, where you can find delicious poutine and giant smoked meat sandwiches.

MLS®: 8503312, $389,000

Housing Purchase Parity

Notes

This quaint home was originally a duplex built 96 years ago. The property is just a few minutes from Préfontaine Station and a short drive away from Olympic Stadium.

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Housing Purchase Power Parity: Winnipeg

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Purchase power parity (PPP) is a theory in the field of economics which measures the value of goods based on different currencies, factoring in the exchange rates. The concept is based on the “law of one price” where identical goods should have the same price in different markets. The Big Mac Index is a clever derivative of PPP, since Big Mac hamburgers represent a common good with very little variation across countries. The Big Mac PPP is used to measure the value of a particular currency by factoring in the exchange rate to determine if it is over or under-valued.1

The Ratehub derivative of the Big Mac Index measures “common houses” across different Canadian housing markets. For the property to meet our criteria to be considered a “Big Mac Home” (i.e. the common home) it must be a detached, two-story, three-bedroom, two-bathroom house. We call our theory, the RH Index.

We take our RH Index to the city of mosquitoes and wind – Winnipeg, Manitoba.

MLS®: 1113607, $249,500

Housing Purchase Parity

Notes

This home is located in downtown west Winnipeg and is a generous 1500 square feet. The property survived the Great Depression and is currently surviving yet another difficult economic time.

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Housing Purchase Power Parity: Calgary

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Housing Purchase Power Parity: Calgary

During the early part of the 20th century, a Swedish professor helped develop what is called the Purchase Power Parity. This economic theory reveals the value of a bundle of goods and what they cost across different currencies once the exchange rate is taken into account.  Flash forward 70 years later, and a more modern theory comes to light. The Big Mac PPP exchange rate between two countries is determined by dividing the price of the burger in one country, by the price of the hamburger in another country. This value is then used to compare the actual exchange rate. If the value is higher, then the first currency is over-valued; lower, then it is under-valued.1

Ratehub has developed a rough iteration of the Big Mac PPP. We call our theory, the “RH Index” and we’ll be using it to determine the value of housing markets across Canada. Instead of measuring the price of the famous McDonalds burger across different countries, we’ll use the pricing of what we’ve determined to be the “common home”. Our “Big Mac Home” is defined as two-story, centrally-located, three bedroom, two bathroom home.2

Our next city is home of the Stampede Festival, in Calgary, Alberta. Let’s take a look at the value of their housing market.

MLS®: C3483896, $484,900

Housing Purchase Parity

Notes

This charming home located in the Bridgeland neighbourhood, is just across the river from Chinatown. The home was also built the same year the Titanic took its maiden and final voyage.

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Housing Purchase Power Parity: Edmonton

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In the early 20th century, a Swedish economist helped develop what is known today as Purchase Power Parity (PPP). This theory measures goods across different currencies, factoring in the exchange rate, to determine the value (over or under) of those particular goods. In the latter part of the 20th century, the publication “The Economist” developed their own version of this theory. Their index measured the price of Big Mac Sandwiches in numerous countries to determine the value of those international currencies against the exchange rate. If the measurement taken is lower, then the first currency is under-valued. If the measurement is higher, then the first currency is over-valued. This was known as the Big Mac Index1.

Well, here at Ratehub, we’ve developed our own little economic theory which we’ve aptly named, the “RH Index”. We’ll use our theory to determine the value of housing markets across Canada measured against the common home. Instead of the price of Big Mac hamburgers, we’ll use the pricing of two-story, centrally-located, three-bedroom, two bathroom homes.

The next city on our list is Edmonton, Alberta – which has seen market stabilization in sales and resale home prices this past year. The average Edmonton MLS residential resale price rose by 2.6% in 2010, but has fallen by that same mark within the first three months of 2011, but CMHC is forecasting a moderate upswing in home prices by the end of 2011, and into next year2.

MLS®: E3271304, $289,000

Housing Purchase Parity

Notes

This is actually over a hundred years old! It was built in 1910, meaning this home pre-dates both World Wars.

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Housing Purchase Power Parity: Victoria

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Almost a hundred years ago, a brilliant Swedish professor helped develop a theory for economics known as Purchase Power Parity (PPP). This theory helps us understand the value of goods and what they cost across various currencies – with the exchange rate factored in. The most modern version of this theory is the Big Mac Index1 which uses the price of Big Mac sandwiches across different countries to determine the value of that country’s currency, measured against the exchange rate. This value, when compared with the exchange rate reveals whether it was under or over-valued. If it is lower, then the first currency is under-valued compared with the second; if it is higher, then the first currency is over-valued.

In this blog series, we’ve developed what we call, the “RH Index”, which is like a cousin to the Big Mac Index. Rather than measure the common Big Mac price in different countries, we’ll be using the “common” house price of two-story, centrally-located, three-bedroom, two-bathroom homes across different housing markets. With our newly created theory, we’ll determine whether the value of these housing markets are over-valued or under-valued, when compared to our average “Big Mac home” price of $390,1632. It’s not perfect, but it’s sufficient enough to have a little fun.

The real estate market in British Columbia has been receiving a lot of buzz recently due to sky rocketing property prices. However, the city of Victoria, which is only 100km from Vancouver, is actually exhibiting stabilizing market conditions. According to CMHC, they believe average resale prices will stabilize in 2011 and 2012. Housing starts are actually down six per cent from last year3.

MLS®: 297343, $665,000

Housing Purchase Parity

Notes

This charming home was built in 1914 and is just under 2000 square feet. If the price seems a little low for B.C., it’s because it’s being marketed as a “fixer-upper”.

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Housing Purchase Power Parity: Vancouver

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Purchase power parity (PPP) is a theory in economics which helps us understand what the value of goods would cost across various currencies, once the exchange rate is factored in. The Big Mac Index1 is a modern take on this theory published by the Economist in the 80’s. The Big Mac Index (PPP) between two countries is calculated by dividing the price of a Big Mac hamburger in one country (in its currency), by the price of a Big Mac in another country (in its currency). This value is then compared with the current exchange rate; if it is lower, then the first currency is under-valued compared with the second, and conversely, if it is higher, then the first currency is over-valued.

Here at Ratehub, we’ve devised our own purchase power parity index to examine the housing landscape of Canada. We call our theory, the “RH Index”. Instead of using Big Mac sandwich prices, we’ll use the home prices – to be more specific, the pricing of two-story, centrally-located, detached, three-bedroom, two-bathroom properties. The current average price of our “Big Mac home” is $390,163 2. We’ll implement our RH Index against notable Canadian cities.

Next on the list is the beautiful city of Vancouver. According to MLS, they expect home sales to increase this year and next, by six and nine percent respectively. Forecasted, this translates to a 14% increase in the average price based on the strong first quarter this year3. Let’s see if we can find a home that meets our criteria:

MLS®: V900922, $998,000

Housing Purchase Parity

Notes

It’s pretty rare to find a 3 bedroom, 2 bathroom property in downtown Vancouver that isn’t a condominium. And as outrageous as this price may seem, it’s actually quite common for a home of this type.

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