Early signs of a ‘real estate ripple effect’ happening in Vancouver area

As Vancouverites grapple with a red hot real estate market, some homeowners are cashing in and moving to the suburbs, or further to Vancouver Island, to capitalize on more reasonable housing prices.

“I think it’s a little early to call it a trend but I like to say it’s an ‘option’ for people now,” Janice Stromar, this year’s president-elect for the Vancouver Island Real Estate Board, told Yahoo Canada Finance. “They can cash out on their really expensive homes in Vancouver, come here, buy a way nicer house for a third of the money and use some of that money to commute.”

According to an analysis of last month’s Multiple Listing Service (MLS) sales data by Vancouver-based research firm SnapStats, end of month sales of downtown Vancouver condos and townhouses under $600,000 and attached properties for $700,000 on the city’s east side, were dramatically outpacing new listings, accelerating the market and draining the pool of homes faster than it can be replenished.

Thomas Davidoff, housing economist and professor at UBC’s Sauder School of Business, admits that while he doesn’t have precise data to support any claims of migrating homebuyers, from an overarching view, it’s clearly happening in some areas.

“Townhomes and apartments in East Vancouver really hadn’t moved much recently, it was mostly the west side but it’s clear in recent years its been spilling outwards,” he says.

He points out that sometimes home sellers take the money they earn for a sale and downsize.

“So that pushes up townhome prices, people who had the money to buy a house on the west side now go to the east side and East Vancouver, which used to be working class and middle class is now getting very, very expensive,” he says. “The drop in the pond ripples out.”

In early March, Port Coquitlam councillor Brad West highlighted the rising cost of living in the suburbs in a conversation with CBC News.

“Generally, people have come to Port Coquitlam because it’s a more affordable place for families,” he told CBC. “My own family, that’s our story. My parents moved from North Burnaby to Port Coquitlam in the the 80s.”

But after visiting an open house for a modest, two-storey, 2,400 square-foot home priced at $1.1 million, West says he thinks the prices even in the hinterlands are becoming out of reach.

“It’s a middle class, working class community and I thought, ‘How is anyone in our community ever going to be able to afford to live in a home listed at $1.1 million?’” said the councillor.

While much debate has happened about the effect foreign investments are having on housing prices, for places like Nanaimo, where Stromar has lived for 22 years, the newcomer profile is more likely Vancouverites looking to buy places with “in-law suites,” self-contained units that can be rented out to generate additional income for the home owner.

“(Foreign investment) is definitely here but they’re about two per cent of our market and they’re not shopping in the market that most people in Nanaimo are shopping in – they’re in the $800,000-plus market,” she says. “The meat of our market is $200,000 to $500,000… once you start getting into that, people want houses as mortgage helpers.”

Getting to work by boat or plane

Commuting is doable, with the ferry from West Vancouver to Nanaimo taking about two hours. There’s also a hele-jet and floatplane that take about 20 minutes.

“If you have a job that requires you only being in the office once or twice a week, then I think it’s a really viable option,” says Stromar.

But going the Vancouver Island “option” and commuting isn’t cheap.

“It’s $40,000 a year to commute daily on the float plane,” she adds. “There’s a fast ferry attempt going on – downtown to downtown – the cost would be considerably cheaper than what it is, it’d be more like $6,000 a year.”

Even still, it’s cheaper than commuting, paying gas and parking she says.

“When you factor in what you’re paying for a mortgage here and what you’re paying for a mortgage there it makes it more reasonable,” says Stromar. “But I think it’s not only the price, it’s the lifestyle.”