Townhouse sector exposes razor-thin housing supply

We are in the heat of a hastily-called federal election and housing is the central platform of the major parties, all of which say they will make housing more affordable for the so-called ‘missing middle’, us common folk who may simply need to buy a townhouse.

Yet the Lower Mainland’s townhouse market exposes the razor-thin housing supply that is the true barrier to more affordable and accessible housing. Townhouses are hugely popular, providing indoor and outdoor space and ground level living at a price that is generally half that of detached house in the same community. With the right planning, zoning and development permit streamlining, they are simpler and faster to build than high-rise condo towers and provide four to six times the density of a detached house.

Yet, out of a total of 216 new listings in August across North Vancouver, Coquitlam, Richmond and South Delta combined, only four townhouses remained unsold at month’s end.

In Port Moody, where 217 townhouses have sold since January, only 9 townhouses were added to the market in August: and 8 of them sold. And, in the Fraser Valley in August, 94 out of every 100 townhouse listings were snapped up by month’s end.

The result is not surprising: the average townhouse price has increased by $165,555 in the past year alone across the Lower Mainland.

Townhouses are the homes the missing middle are looking for, yet the federal election promises are almost totally focused on building subsidized rental apartments.

The supply is shallow across the entire Metro housing market. The total number of new listings in August were at levels last seen in 2018-19, two of the slowest years in real estate since the turn of the century.

With 3,166 properties sold across Greater Vancouver in August, new listings were in a freefall, dropping to 4,099 homes. After declining for months, total active listings at the end of the month were just 9,243 units. This compares with more than 13,500 in August of 2020 and more than 10,300 active listings in July 2021.

Without a significant increase in listings in September, pressure will again be on prices this fall as buyer activity picks up from the summer break. While some pulled back from real estate activities this month, the lack of properties available likely limited activity of buyers as they waited in anticipation of new listings that never came in August. And like Charlie Brown waiting to kick the football, will it get pulled away again in September if sellers still hold back from listing?

Repeated attempts to stifle housing demand in Greater Vancouver have failed simply because people desire the freedom and financial gains that homeownership provides.

After suffering under the speculation tax, the foreign-home buyer tax, the vacant homes tax, the property transfer tax, rising development fees and community amenity costs, the current federal government now plans to add an anti-flipping tax that will chip away at home equity and punish flexibility. Metro Vancouver home buyers are the most resilient in the country, as shown in August which posted the sixth highest for any August on record.

All that is needed to regain balance in this market is increased supply. Evidences is seen in the current condominium market. August condo sales were far above the detached and townhouse markets. And a key reason is supply and selection. In August there were more new listings – 2,158 – for condos than for detached houses and townhouses combined. As well, there are about 38,000 new condos under construction across Metro Vancouver, compared to just 3,150 new townhouses and about 2,000 detached houses. Condo sales in August were up 22% year over year, while townhouse sales were down 7% and detached homes off by 14%.

But here is the clincher: despite the soaring sales, a healthy supply has kept condo prices relatively in check: the average Lower Mainland condo apartment has increased in value by 6.9% in the past year (to $729,700), compared to 12.6% for detached houses (to $1,615,000) and 13.1% for townhouses (to $849,900), both of which are seeing a significant shortage.

Supply is the answer. The rest is rhetoric. Remember this at the voting booth on September 20.

Kevin Skipworth
Partner/Broker and Chief Economist at Dexter Realty

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