Oil prices could steer real-estate market

As CEO of the Greater Vancouver Home Builders’ Association, Peter Simpson is understandably interested in seeing how gas prices will affect the behaviour of home buyers in the long term.

Simpson remembers when potential buyers considering an area were advised to try driving to work from there on a Monday morning. It wasn’t so much to find out how much gas they would use as it was to determine how long the commute would take.

That was when gas was cheap, and buyers who couldn’t afford a mortgage on a home in the city could just go find a house in the suburbs.

“But now I suspect people will be driving to see how much it actually costs in gas to drive that distance, and make decisions based on that,” Simpson told the Georgia Straight. “That has to have an impact on how far out they’re prepared to look at homes and drive to work.”

Anyone who drives nowadays likely complains about feeling gouged at the pumps. Since January, gas prices in Vancouver have increased by about 40 cents a litre. Saudi Arabia, the world’s leading oil producer, has pledged to increase its output starting in July, in an attempt to stabilize the escalating price of petroleum products.

It doesn’t help that Greater Vancouver doesn’t have a public-transit system as effective as the one in Toronto, said Simpson, who lived in that city before moving west 15 years ago.

“When I get out of a subway station [in Toronto], there’s always a streetcar or a bus very soon coming down the road,” he said. “I used to take public transit because it didn’t inconvenience me. They had a very efficient grid system there.”

Simpson suggested that if the Lower Mainland offered the same quality of mass transit, gas prices wouldn’t be as much of an issue for home buyers looking farther away from the city centre.

With the end of the era of cheap gas, policymakers should consider abandoning plans that encourage urban sprawl, according to Clark Williams-Derry, research director of the Seattle-based nonprofit Sightline Institute.

In a May report, Williams-Derry notes that Greater Vancouver’s record on compact growth between 2001 and 2006 had “slipped” compared with the 1990s. His report points out that highway-expansion plans like the twinning of the Port Mann Bridge and the widening of Highway 1 could further erode the region’s record.

“Policy makers should consider closer city development over widening highways,” Williams-Derry told the Straight.

In the report, he states that “urban form is closely correlated with energy consumption.”

“Sprawling land use patterns separate jobs, stores, and services from residential areas, thereby increasing the distance that residents must travel to meet their daily needs,” the report notes. “Residents of sprawling areas rarely find walking, biking, and transit convenient; most trips require a car. In these ways, sprawl boosts fuel consumption and the attendant climate-warming emissions from daily travel.”

Cameron Muir, chief economist for the B.C. Real Estate Association, noted that while significant changes in housing choices will take some time to manifest, high fuel prices would further encourage developers to build homes—particularly high-density projects—near mass transit.

“That’s been going on for some time now,” Muir told the Straight. “Certainly with higher gas prices, that interest on land around transit nodes will increase.”

What high gas prices, coupled with rising food costs, have done so far is dampen home sales in the province, with consumers delaying major purchase decisions, according to a report released by the BCREA on June 16.

The BCREA states that the volume of sales on the Multiple Listing Service dropped 27 percent—to $3.85 billion—in May, compared with the same month last year. The report also notes that residential unit sales declined 31 percent, to 8,101 units, over the same period.

However, the report also points out that average residential prices in B.C. have increased by six percent compared with last year, to $475,656.

Comments

2 Comments

buyerbeware

Jul 6, 2008 at 2:34pm

Why more than just gas prices will burst BC’s housing bubble:
- Olympics venue construction complete as of spring ’08 (2 billion of investment completed)
- Housing speculation rampant in BC in the past three years
- Widespread psychology of “things will continue to go up until well after the games”
- American speculators begin cashing out to cover their losses south of border
- Listings in the lower mainland triple in 2008 as speculators/investors try to sell
- With multi-billions in mortgage defaults at stake, Canada’s banks release weekly reports pleading Canada is separate from the US (”˜Canada will withstand US meltdown’, ”˜Canada does not have a subprime crisis’)
- Canada’s versions of subprime mortgages are 0% down, no income verification with 40 year amortizations (40 year mortgages merely inflated and prolonged the bursting of the bubble)
- Most Canadians are now heading south for recreational and/or winter homes rather than west to BC (with their at par loonies they are presently able to purchase new resort homes for a third of what they would pay in the Okanagan, Lower Mainland or Victoria)
- Forestry and tourism start to feel America’s economic pain
- Construction, one of the pillars of BC’s recent boom, dwindles as developers stall projects
- Possibility of NDP regaining power in the upcoming BC election erodes business confidence
- Interest (mortgage) rates begin rising in late ”˜08 eroding affordability
- Housing affordability surpasses 70% of average incomes in many areas of the lower mainland
- Migration patterns intensify as oil-powered Alberta/Saskatchewan entice workers from across Canada with exorbitant salaries and low costs of living/tax environments
- Prices of energy (carbon taxes) strain potential buyers just as banks begin tightening their lending practices
- The ripple effect’s first wave of significant home foreclosures and price declines commence in Vancouver autumn ’08

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GASDRINKER

Mar 2, 2011 at 6:38pm

The gas prices here in Vancouver are so high there is no limit it goes up everyday but the funny thing here is that the wages always go down. The public transit is not for everyone here There is no bus or train when/where I go to work
this is just stupid stupid government

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