Author Archives: Melanie Cons

Millennials are flocking to Vancouver despite the housing crisis, says UBC demographer

VANCOUVER—Mountains and public health care are what led 34-year-old Katie Marshall to move to Vancouver this summer, at a time when the pervasive belief is that millennials are fleeing the city in droves.

But Marshall is, in fact, one of thousands of millennials moving to the lotus land despite high housing prices. There’s a lot to love, she explained.

“I’m a distance runner and I love to hike, so a lot of that is much more manageable for us in Vancouver. I don’t want to knock Oklahoma — it is lovely — but there’s a distinct lack of mountains.”

There are so many young people making the move to Vancouver that newcomer-millennials make up a significant percentage of population growth, according to a demographer from the University of British Columbia.

Marshall, a zoology professor, grew up in the Kitchener-Waterloo area and lived in Vancouver for three years after she completed her PhD at the University of Western Ontario in 2013. She then took a job in Oklahoma City in 2016, where she settled into a comfortable life, renting a three-bedroom house for US$1,500 per month with her husband, a research assistant.

But she missed the Canadian waterfront city known for its wildly unaffordable housing prices. So she accepted a job at the University of British Columbia and last week moved into subsidized housing at UBC, where she pays $2,600 per month for a three-bedroom apartment.

She called the rent “mind blowing.”

“We’ve come in far too late to ever contemplate buying unless the housing market were to suddenly crash. It just makes more financial sense to realize we’ll be renting. If we wanted to buy a house, it would have to be really far from UBC and we’ll have that long commute.”

“My husband and I, we’re a dual-income family. That makes life a little bit easier, and we don’t have kids, so we have a lot of advantages that other people might not.”

She is one of thousands of millennials arriving in the Vancouver area every year, according to Statistics Canada data. Nathanael Lauster, an associate professor of sociology at UBC, has been keeping track.

The number of people aged 20 to 34 in Metro Vancouver increased by 6,000 from 2012 to 2017 due to immigration, according to Lauster’s analysis. That figure doesn’t take into account people who are born here.

Putting those two together, it’s clear that migration plays a large role.

From 2011 to 2016, migrants made up about 13 per cent of the population growth in the 23-to-27 age group in Metro Vancouver, according to census data. For people ages 18 to 22, that figure rises to about 15 per cent.

This is not new, Lauster added. Vancouver has been a gateway city for immigrants for decades.

“There is a tendency to want people who grew up here to have the ability to stay,” he said. “That makes sense, but at the same time, those other people who keep coming are no less people than the people who grow up here.”

And yet the idea that Vancouver is being drained of its lifeblood due to an entire generation leaving the city to find cheaper housing remains the focal point of countless dinner-table conversations.

Locally conducted polls often reflect this tension. For instance, six in 10 young British Columbians are seriously considering moving to areas where home ownership is less costly, according to an Insights West poll conducted in April.

Lauster, who regularly comments on Vancouver’s housing crisis, does not discount that report or others like it, but says an important part of the conversation is missing.

“There are more people that are moving into Vancouver than are leaving. But (the polls are) only talking to people who are already here.”

Still, he acknowledged Vancouver housing prices are rising faster than local incomes, pushing some people out of the city while inviting those who can afford it.

“It’s very fair to ask: Are we seeing the rise of Vancouver as this luxury resort community where only wealthy people can live? There is some evidence of that,” Lauster said. “That’s not quite the same as concerns over losing millennials or losing young people.”

Some people adjust their expectations and accept the idea of living in an apartment for the rest of their lives, he said. After all, living in multi-family buildings is commonplace in many cities around the world. But some opt to leave.

Software programmer Chi Hsi grew up in a single detached house in Killarney, a neighbourhood in East Vancouver. Her mom still lives in that home, now worth $1.6 million. Hsi and her fiancé, an electrician, could not afford anything close to that, and yet they firmly believed a house was the best place to raise the children they plan on having.

They looked in Vancouver and the nearby suburbs: Burnaby, Coquitlam and even Port Coquitlam. There were virtually no houses available for less than $1 million.

“It was just very frustrating to see,” the 29-year old said.

Lauster acknowledged the city needs to be more welcoming to everyone, both longtime locals and newcomers.

“I think the way to do that, to resolve both of those issues in terms of stopping displacement and welcoming new people to come here, is to build lots of diverse kinds of housing options so different people can find themselves at home here,” he said.

“We need lots more social housing, lots more co-operatives, lots more purpose-built rental housing and probably lots more condos, too.”

But single-detached houses were notably left off his list — Lauster recently authored a book titled The Death and Life of the Single-Family House — and that’s the kind of home Hsi and her fiancĂ© wanted.

Last fall, they ended up buying a three-bedroom house outside of the city, in Langley. Even with both of their incomes, they needed Hsi’s mother to help them with the down payment. Houses in their neighbourhood, Walnut Grove, are listed for an average of $900,000.

Hsi spends three hours a day commuting to and from work, but to her, the trade-off is worth it.

“I visited my friend’s townhomes or apartments, and I think: How could they even raise a family here?”

She admitted living so far from the city centre has its downsides. Many of her friends have decided to sacrifice square footage in order to stay closer to their childhood home.

“Where I lived in Killarney, it was very central. I would host game days or invite friends over,” she said. “Now, I have to convince them to come out to my place.”

Don’t Save More Money, Ask for More Money!

The most satisfying way of working towards a big purchase, a house, a car, a cottage, isn’t by taking a bigger slice of your income pie and putting it towards savings. It’s by making sure your pie is as large as possible and taking the same percentage out. Yes, it sounds obvious, and no one is says “No” when offered more money, but do you ASK for more money? Now this works the best when you’re going into a job fresh; don’t be afraid to negotiate even though you are so excited to get that job that you may be afraid asking for more cash could hinder you right out of the gate. If you are already in a job, you probably have an annual performance review where you will get a bit of a bump if only to keep current with inflation. It’s during these periods that you need to be ready, and here are some tips to help.

Learn Your Value – Talk to people and research how much people make in your field. Now you can go about this by asking your colleagues what they make, but be careful with this, some people can get touchy about how much they make and some employers may take issue with these types of questions. Getting hauled into HR won’t look good if you plan on asking for more money shortly after. What you can do instead is ask people in the same field and living in the same area what their compensation is. Researching online at Salary.com and Glassdoor.com are also good resources for figuring out what you’re actually worth.

Success Folder – You’re good at your job, right? Sure you are! People love you! Use it! Each time you receive praise from a client or a boss, save proof of this to your success folder. If it’s an email, save it. A voicemail or verbal compliment, transcribe it. These things can add up and next time you have a review you have tangible evidence of the positive impact you have had by doing your job the best way you know how.

Come Up With Your Own Number – Some companies will offer a standard bump, or your manager may say to you offhand what they are planning on giving you as a pay raise this year. Don’t let that be the final word. Request a sit down and illustrate why you deserve the raise you do. It’s easy to be passive, make sure you are active!

Practice Negotiating – Sitting down with the big BossMan or BossWoman can be stressful. We’ve all been there. It feels like you’re being pulled into the principal’s office for something you’ve done wrong. So, in order to get over these jitters find someone who knows something about business and management and practice with them. They can tell you how you are coming off and what you may be doing wrong.

These are easy, zero sacrifice ways of making your financial dreams easier to obtain. They may seem stressful, but keep in mind
no one has ever been fired for asking for a reasonable raise, especially when you have the data to back it up!

The housing market is cooler and Canadians are taking on less debt — but there is one downside

Canada has some of the highest household debt levels in the world, but last week a new report from Statistics Canada found that that could be starting to change.

The country’s household debt-to-income ratio fell to 168 per cent in the first quarter of 2018, after reaching a historic high of 170.5 per cent in Q3 2017.

“[The decline hints] that [the] household debt-to-income ratio might have turned a corner last year after increasing fairly steadily for decades,” writes RBC senior economist Robert Hogue, in his latest note.

The decline has everything to do with a new mortgage stress test, which came into effect on January 1, according to Hogue. The test has cooled the housing market significantly, leading to month after month of year-over-year sales drops and prices. The cooler market restrained growth in mortgages outstanding to its weakest rate in 17 years last quarter — just 4.5 per cent.

But there is a slight catch to this good news. Canadian households’ net worth also dipped slightly in the first quarter of 2018, as the values of their property started to fall.

“The dip in households’ net worth resulted from a marked slowdown in asset growth,” notes Hogue. “Household assets grew at their slowest pace in nine years in the first quarter, as a cooling in Canada’s housing market curbed the growth of real estate assets significantly.”

Households’ real estate holdings rose by just 1.3 per cent in the first quarter, representing the weakest increase since the 2008-2009 recession.

Still, the drop in household assets isn’t something to be overly concerned about, according to Hogue. Or at least, not yet.

“The flip side of a cooler housing market
is that slower growth in the value of real estate holdings tempers the asset side of the ledger and causes households’ net worth to erode slightly,” explains Hogue. “Still, this shouldn’t be a big worry at this stage considering how much both assets and net worth increased over the past several years.”

Economists predicted that the Canadian housing market would warm up by spring — here’s what they’re saying now

The first quarter of 2018 was dominated by economic forecasts calling for a rough first quarter for the Canadian housing market, followed by a recovery in the spring.

But spring has come and gone, and Canadian home sales are still slumping on a year-over-year basis, while prices in most markets remain stubbornly flat.

While provincial housing policy and a rising interest rate environment have a role to play in the market’s slumping performance, most economists blame a new mortgage stress test introduced on January 1 for the current state of affairs.

So when will the market finally adjust to said test? It depends who you ask.

“We held the view until now that the transitory effect of the stress test implemented on January 1 would start to wane by the spring,” wrote senior economist Robert Hogue, in a note earlier this month. “Well, there was no indication of any material rebound in home resale activity through May.”

Hogue writes that while he had initially predicted that home sales would drop by 4.3 per cent year-over-year in 2018, that number could double by the end of the year.

Meanwhile, Scotiabank senior economist Marc Desormeaux is predicting that a recovery is still on the way, just later in the year.

While in April he wrote that sales appeared to be “bottoming out” and that following the first quarter contraction he predicted a “modest but broad-based recovery of sales activity [in the second quarter],” he is now predicting that the recovery will happen later in the summer.

“An early-year slowdown in Canadian housing market activity persists in the wake
of rising interest rates and mortgage stress tests that came into effect on Jan. 1st,” he writes, in a recent note, before predicting a “modest recovery
later in 2018.”

Not every economist is adjusting their forecast. TD economist Rishi Sondhi wrote in a recent note that May’s sales numbers largely matched his earlier predictions.

“On balance, this was a better-than-expected report,” he wrote of May’s sales numbers, in a recent note. “All told, the figures support the notion that markets are stabilizing after significant volatility in the early part of the year related to the implementation of updated [mortgage rules].”

Sondhi adds that impacts from mortgage rule changes tend to be “rapid, but also transitory,” which means a recovery could be around the corner.

“Going forward, we expect activity to find support and begin to recover very gradually in the second half of the year,” he writes. “While rising borrowing costs will weigh on activity and prices, the housing market should nonetheless improve, supported by low unemployment, rising wages, and healthy population growth.”

Calgary Offices at Emptiest in a Decade Despite Oil Rebound

Even as oil prices trade near the highest in four years, offices in the capital of Canada’s energy industry are about as empty as they’ve been since at least 2008.

The office vacancy rate in Calgary climbed to about 23 percent in the first quarter of this year, up from 20 percent a year earlier, according to a report from Toronto-based Altus Group Ltd. The increase is partly due to the completion of 2.5 million square feet of office space in the year through March, the real estate consulting firm said.

Demand has lagged as well. First-quarter sales of office-investment properties plunged 83 percent, according to Altus. Overall investment-property sales slumped 28 percent in the first quarter, a C$295 million ($222 million) drop from a year earlier.

While global oil prices have rebounded over the past 12 months, Canadian crude’s discount to the U.S. benchmark has widened in that period, hurt by a shortage of pipeline space. That’s restrained producers from ramping up output and led to continued job cuts at companies including Cenovus Energy Inc.