In the 1970s, home ownership was part of the bargain for an average middle-class family in New Westminster. But with the sky high mortgage prices an average modern middle-class’ dream of owning a home in New Westminster may remain just that, a dream. According to a study by the Royal Bank of Canada (RBC), home ownership for a basic Bungalow – including New Westminster taxes, utilities and mortgage payment – may take up to 90 percent of a typical family’s gross income. This number is reached at by comparing the cost of standard house to the typical household income in the city and assuming a down payment of 25 percent and 25 year paying off period.
When home affordability is considered against an average household income, is currently the second most expensive city the world over, with a standard home costing up to ten times the typical household income. (The accepted ratio is four. A ratio of six is feasible but crushing. A ratio of ten is just impossible.) This means that New Westminster is more expensive than Paris, London and even New York. It may be hard to believe but this is the truth.
In the 1970s, the annual income of a couple aged 24-35 was the equivalent of $73,000 today. Today people in the same age bracket earn just a mere 68,000 annually. Even as more women take income earning jobs, families are earning less today, not more. At the same time, the average housing cost has risen by 149 percent. The modern family feels they have less money and time compared to the previous generations, even before factoring in the New Westminster’s relatively inflated housing prices. This inter-generational housing affordability inequity is not only disturbing but quite distressing considering most of the New Westminster downtown condos (14 percent) and 7 percent of other city homes remain vacant. Among the major causes of this is that investors are more interested in safe and productive real estate investment than the less lucrative work of managing residential units.
What is the net result of all this? Many middle-class families are now opting to live in rental houses rather than buy one of their own. It is a lot cheaper to rent an apartment than buy the same.
According to REMAX, properties in New Westminster houses are getting expensive, It’s now evident that housing affordability in New Westminster is decreasing, especially for condos, that were once affordable. This is attributed to the ever increasing demand both from the locals and foreigners. The increase in demand is due to high rank that this city enjoys. This city is said to be one of the world’s livable locations. It is also ranked 4th in terms of its quality of living as compared to other cities in the world. These factors have led to very high demand for New Westminster real estate within this city leading to sky-high house prices like these ones.
Other factors that may have resulted to high prices in this residential market is the fact that New Westminster is one of the largest city in Canada, where it is ranked 8th. New Westminster is also a coastal seaport which has also seen tourism thrive as one of the main industry. This goes without saying a good reason for the sky rocketing prices in the real estate sector.
A steady rise in job creation has also been sited as the other factor leading to the un-affordability. I know that this sounds confusing to some, but this how job creation translates to un-affordability; the more jobs out there mean more money, thus more house buyers. It’s this high demand that leads to sky-high prices.
New Westminster is ranked 13th least affordable city in the world.
Asked of my opinion as to which is the main reason for this overshooting of New Westminster property values, I would out lightly site excessive speculation which I think is happening in New Westminster today. The onslaught of foreigners in the market comes also as a catalyst to the problem. It is not just a phenomena in the high luxury areas of West Vancouver properties. For instance West Vancouver condos have actually dropped as opposed to New West: http://www.worldpropertylinks.com/west-vancouver-condos/.
This might be good to the real estate investors, but it is not doing New Westminster’s residents any good. The city should embrace cooperative housing, secondary suites, among other strategies as way to tackle this problem. Otherwise the price of houses will keep on the same trend.