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.

Calculations

We can use our Halifax mortgage calculator to determine this home’s affordability. When comparing Halifax mortgage rates, we select the best rate of 3.29%, which works out to $1,133/month in mortgage payments. Upon closing, the Land Transfer Tax would be $4350.

*5-year fixed rate over a 25-year amortization with 20% down payment as of August 22

RH Index

In 2010, Halifax experienced a 1.4% surge in population growth based on migration alone, which was reflected in the number of housing starts. However, CMHC is forecasting that number (housing starts) to drop and level off this year and next. Likewise, home sales will also hold at the same level in 2011 and into 2012 (both will sit just below the 2010 mark). What is startling in the face of plateau-ing home starts and home sales is the sharp rise in average home prices; where home prices have been steadily increasing since 2002.3

Our RH Index will measure the PPP value of the Halifax housing market.`

The implied purchasing power parity is $1.34 to $1.

We divided $390,163 (the average Big Mac home price) by $290,000 (the Halifax Big Mac home price).

This indicates that your dollar can stretch further in the Halifax housing market when compared to the Canadian average. The actual average Halifax average home price is $262,000.4

If you’re one of the many who have just moved to Nova Scotia, reach out to a Halifax mortgage broker to talk about your mortgage needs.

 

Sources

1 Big Mac Index: http://www.economist.com/node/8649005?story_id=E1_RGQJDDV

2 Standard Canadian 2-storey home: http://www.muchmormagazine.com/2011/07/canada%E2%80%99s-residential-real-estate-market-sees-sizeable-year-over-year-price-increases/

3 CMHC: https://www03.cmhc-schl.gc.ca/catalog/productDetail.cfm?cat=87&itm=5&lang=en&fr=1314132311656

4 Halifax average price: http://www.livingin-canada.com/house-prices-canada.html

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.

Calculations

By examining Saskatoon mortgage rates, we can determine the affordability of this home. The best rate available is 3.31% which denotes monthly mortgage payments of $1,311. Using the Ratehub Land Transfer Tax Calculator reveals $1,005 in title transfer closing costs.*

*5-year fixed rate over a 25-year amortization with 20% down payment as of August 21

RH Index

According to CMHC, Saskatoon experienced a 27-year high in housing starts in 2010, up a whopping 67% from 2009. However, we will start to see a decrease over this year and next, although levels will still remain above 2009 heights. The forecasted MLS residential sales price is expected to increase only modestly, 1.3% this year followed by 1.7% next year.3

Our RH Index will measure the value of the Saskatoon housing market by taking a sample “Big Mac” home and comparing it against the standard Big Mac home.

The implied purchasing power parity is $1.16 to $1.

We divided $390,163 (the average Big Mac home price) by $334,900 (the Saskatoon Big Mac home price).

This indicates that the Saskatoon housing market is just above par, which means your “house dollar” goes a little bit further in the home of the Saskatonians.

To purchase a home in the prairie province, get in contact with a Saskatoon mortgage broker to help you with your financing.

Sources

1 Big Mac Index: http://www.economist.com/node/8649005?story_id=E1_RGQJDDV

2 Standard Canadian 2-storey home: http://www.muchmormagazine.com/2011/07/canada%E2%80%99s-residential-real-estate-market-sees-sizeable-year-over-year-price-increases/

3 CMHC: https://www03.cmhc-schl.gc.ca/catalog/productDetail.cfm?cat=107&itm=7&lang=en&fr=1313954557390

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.

Calculations

Using Ratehub’s mortgage payment calculator, we can determine the affordability of this house. By comparing mortgage rates in Montreal, we’re able to find the lowest rate of 3.40% which translates to $1,537 in monthly mortgage payments. Using the Montreal Land Transfer Tax calculator reveals $4,335 in title transfer closing costs.

*5-year fixed rate over a 25-year amortization with 20% down payment, as of August 18, 2011

RH Index

According to CMHC, they expect Montreal MLS transactions to remain level with 2010 as new housing starts decrease this year and into next. One thing to note is that CMHC is expecting the growth of the average MLS price to fall to five per cent.3

The standard price of our “Big Mac” Home is $390,163. Let’s apply the RH Index to determine Montreal’s housing market value.

The implied purchasing power parity is $1.003 to $1.

We divided $390,163 (the standard Big Mac home price) by $389,000 (the Montreal Big Mac Home).

As you can see, the Montreal market is right at par. The actual average house price in Montreal is $300,000, but CMHC is forecasting $312,000 by the end of 2011.4

To understand your financing needs in Quebec’s largest city, talk to a Montreal mortgage broker.

 

Sources

1 Big Mac Index: http://www.economist.com/node/8649005?story_id=E1_RGQJDDV

2 Standard Canadian two-storey home: http://www.muchmormagazine.com/2011/07/canada%E2%80%99s-residential-real-estate-market-sees-sizeable-year-over-year-price-increases/

3 According to CMHC: http://publications.gc.ca/collections/collection_2011/schl-cmhc/nh12-61/NH12-61-2011-1-eng.pdf

4Average Home Price in Montreal: http://www.livingin-canada.com/house-prices-canada.html

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.

Calculations

We can use the Ratehub mortgage payment calculator to determine this property’s affordability. Looking at the best mortgage rates in Winnipeg reveals that you can obtain a fixed rate at 3.49%, which equates to only $995 in monthly mortgage payments. The Winnipeg Land Transfer Tax amounts to $2,640.

*5-year fixed rate over a 25-year amortization with a 20% down payment, as of August 17, 2011

RH Index

2010 was a good year for total housing starts in Winnipeg as it increased from 2009 levels by 60%. The residential MLS sales price has steadily been increasing since 2003, virtually doubling in that seven year time span.2 The price of our standard “Big Mac Home” is $390,163.3 Let’s put our RH Index to use and compare these two homes.

The implied purchasing power parity is $1.56 to $1.

We divided $390,163 (the standard Big Mac home price) by $249,500 (the Winnipeg Big Mac Home).

This means that you get extra bang for your buck in Winnipeg. Purchasing a home here means you get one and half times “more house” for your dollar. We can conclude that housing market in Winnipeg is highly under-valued.

To find great deals in this market, use Winnipeg mortgage brokers to solve your financing needs.

Sources                                                                                                                                                                                              

1 Big Mac Index: http://www.economist.com/node/8649005?story_id=E1_RGQJDDV

2 CMHC: https://www03.cmhc-schl.gc.ca/catalog/productDetail.cfm?cat=107&itm=9&lang=en&fr=1313590626890

3 Standard Canadian two-storey home: http://www.muchmormagazine.com/2011/07/canada%E2%80%99s-residential-real-estate-market-sees-sizeable-year-over-year-price-increases/

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.

Calculations

Let’s take a look at the affordability of this home by comparing mortgage rates in Calgary. Currently, market conditions are favourable and the best rate is 3.09%. Using our mortgage payment calculator reveals that it costs $1,854 a month to afford this property. And since the Alberta Land Transfer Tax does not exist, the title transfer fee is only $132.

*5-year fixed rate over a 25-year amortization with 20% down payment, as of August 16, 2011

RH Index

Calgary has a healthy housing market, as evidenced by their average home prices, although not as lucrative as Toronto or Vancouver. New housing starts should start to see a decline in 2011, but rebound later in 2012. CMHC believes residential MLS sales next year will increase 2.3%, which is skewing downward from the 4.8% increase in 2010.3

The Canadian average price of a two-storey home is $390,163 – which is what we will be using as our index.

How similar is this home when compared to the average Canadian price? What is the value of the home’s price tag versus the Canadian average price?

The implied purchasing power parity is $0.80 to $1.

We divided $390,163 (the “Big Mac home” price) by $484,900 (the common home in Calgary that met our criteria).

This means that you are getting slightly “less house” for your dollar in Calgary when compared to the Canadian average. We can say that Calgary`s housing market is slightly over-valued. Alberta has been hovering around the National average home price for most of this year, so you can expect to purchase a home generally “at par” in Calgary, give or take a few thousand dollars. The actual average home price in Calgary is $401,000.4

It’s best to seek a Calgary mortgage broker to help you with financing options. They have valuable industry knowledge and will work to find you the best rate for your situation.

Sources

1 Big Mac Index: http://www.economist.com/node/8649005?story_id=E1_RGQJDDV

2 Standard Canadian two-storey home: http://www.muchmormagazine.com/2011/07/canada%E2%80%99s-residential-real-estate-market-sees-sizeable-year-over-year-price-increases/

3 CMHC: https://www03.cmhc-schl.gc.ca/catalog/productDetail.cfm?cat=107&itm=1&lang=en&fr=1313513300031

4Average Home Price in Calgary: http://www.livingin-canada.com/house-prices-canada.html

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.

Calculations

The rates are quite favourable in Alberta right now. A quick comparison of the best Edmonton mortgage rates, reveal a low interest rate of 3.09%. This translates to monthly mortgage payments of $1,105. And since there is barely any Land Transfer Tax in Edmonton, the fee is only $93.

*5-year fixed rate over a 25-year amortization with 20% down payment, as of August 11, 2011

RH Index

The average MLS sale price is $365,648 thus far in 2011, but Edmonton sits $36,000 below it. However, CMHC is expecting a very moderate 2.4% average sale price increase by 2012. This particular property fits our “Big Mac home” criteria perfectly. Now, let’s apply our RH Index to gauge the value of this home, against our standard “Big Mac Home” of $390,163.3

The implied purchasing power parity is $1.35 to $1.

We divided the “Big Mac Home” price ($390,163) by the Edmonton “Big Mac Home” ($289,000).

This means that you are getting “more house” for your dollar in Edmonton.

It appears Edmonton’s housing market has great deals where you can really stretch your dollar on housing. Talk to Edmonton mortgage brokers to learn more about your financing options.

Sources

1 Big Mac Index: http://www.economist.com/node/8649005?story_id=E1_RGQJDDV

2CMHC: http://www.cmhc-schl.gc.ca/odpub/esub/64343/64343_2011_B01.pdf?fr=1312341385021

3 $390,163 – Standard Canadian 2-storey home: http://www.muchmormagazine.com/2011/07/canada%E2%80%99s-residential-real-estate-market-sees-sizeable-year-over-year-price-increases/

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”.

Calculations

By looking at current Victoria mortgage rates, we can determine what the affordability of this property might look like. The best rate available is 3.59% which works out to $2,681/month. The Land Transfer tax in Victoria works out to $11,300.

*5-year fixed rate over a 25-year amortization with 20% down payment, as of July 29, 2011

RH Index

The “Big Mac home” price is $390,163. Victoria, although not as heavily priced as its neighbour to the east, Vancouver, is still a strong market – with forecasted gains of nine per cent this year and a further eight per cent next year3.

How similar is this home when compared to average “Big Mac Home” price? What is the value of the home’s price tag versus the average?

The implied Purchase Power Parity is $0.59 to $1.

We divided $390,163 by $665,000 (the “Big Mac Home” in Victoria that met our criteria).

This means that you are getting almost “half the house” for your dollar when compared to the Canadian average. Obviously the housing market in Victoria, much like most of British Columbia, is over-valued.

To understand more about mortgages and mortgage rates, it is best to seek out Victoria mortgage brokers for advice. They have great expertise in financial housing options and will be able to assist you in with any queries you may have.

Sources

1 Big Mac Index: http://www.economist.com/node/8649005?story_id=E1_RGQJDDV

2 Standard Canadian two-storey home: http://www.muchmormagazine.com/2011/07/canada%E2%80%99s-residential-real-estate-market-sees-sizeable-year-over-year-price-increases/

3 CMHC report: http://www.cmhc-schl.gc.ca/odpub/esub/64367/64367_2011_B01.pdf?fr=1312335736277

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.

Calculations

We are able to determine what the affordability of this home might look like using our mortgage payment calculator. By selecting the lowest rate of 3.59% when comparing Vancouver mortgage rates, we’re able to see that monthly payments are an incredible $4,024. The Land Transfer Tax in Vancouver amounts to $17,960 as part of the closing costs.*

*5-year fixed rate over a 25-year amortization with 20% down payment

RH Index

Although we just started measuring our index against housing markets across Canada, we can say with confidence, that Vancouver is the most expensive and over-inflated city. It’s surprising, considering that the cost of living is only ranked 65th in the world according to Mercer, yet home prices continue to soar to almost New York City levels4. The average “Big Mac home” price is $390,163. We will be using this amount as our baseline “currency” to get our RH Index value.

How similar is this home when compared to the average Canadian price? What is the value of the home’s price tag versus the Canadian average price?

The implied purchasing power parity is $0.39 to $1

We divided $390,163 (the average “Big Mac” home price) by $998,000 (the “Big Mac home” in Vancouver).

This means that you are getting significantly much “less house” for your dollar when compared to the average. Therefore, we can say Vancouver’s housing market is over-valued. The actual average home price in Vancouver is $792,0005.

It can be difficult to secure financing in a market as expensive as Vancouver, so if you need sound financial advice, one of your best bets is to talk to a Vancouver mortgage broker.

Sources

1 Big Mac Index: http://www.economist.com/node/8649005?story_id=E1_RGQJDDV

2 Standard Canadian two-storey home: http://www.muchmormagazine.com/2011/07/canada%E2%80%99s-residential-real-estate-market-sees-sizeable-year-over-year-price-increases/

3 CMHC report: http://www.cmhc-schl.gc.ca/odpub/esub/64363/64363_2011_B01.pdf?fr=1311958258187

4 Cost of living survery: http://www.mercer.com/press-releases/1311145

5Average Home Price in Vancouver: http://www.livingin-canada.com/house-prices-canada.html