We recently returned from an extended winter holiday in Valencia, Prague and Paris to find Greater Victoria’s real estate prices soaring to new heights – some 15% higher than a year ago. This led to reflection on housing-affordability solutions evident throughout much of Europe.
Valencia for example, is generally still below the tourist radar, whose 800,000 residents live almost exclusively in condominiums or rental apartments, often much more modestly-sized than we are used to in North America. A single-family stand-alone residence is almost impossible to find.
Horrible lifestyle, you think? Consider this.
Valencia has more parkland, playgrounds and recreational facilities than one can imagine. Until 1956, what was a wide, often-flooding river, is now a 9-km long, 200-meter wide park, winding through the city. Comprised of tennis courts, soccer fields, fitness equipment, bicycle and hiking trails, it provides an outdoor playground for residents of countless neighbourhoods, within minutes of their homes.
In Valencia in particular, and throughout Europe generally, the need for personal vehicles is greatly reduced by efficient and affordable transportation infrastructure. An extensive metro and bus transportation system criss-crosses Valencia at time intervals rarely beyond 10 minutes. Despite being in a city more than twice the population of Greater Victoria, we never once encountered a traffic jam, regardless of time of day.
What about the “happiness” index of Valencians, you might wonder? To us, regardless of age, they looked extremely fit and content. Obesity seemed as rare as the single-family home.
In Canada, with our abundance of land and our existing stock of family houses, it is clear the single-family dwelling is here to stay. However, new housing construction, particularly in the larger urban centres, is far more likely to be strata properties and rental apartments.
Affordability pressures, along with a dearth of land available for new development, makes this trend inevitable.
Historically, our life’s housing cycle follows a general pattern — rental apartment first, ownership of a condominium a few years later, a small affordable house, at least one larger house as the family grows and, full circle — back to a condo or rental in our senior years. It is very likely some of these traditional steps will gradually disappear.
We must remember an ever-increasing proportion of our population already lives in a condominium or rental unit. Inevitably, this trend will accelerate away from the single-family home toward the much smaller multiple-unit residences found in much of the world outside North America.
Even now, as multiple-unit neighbourhoods proliferate, the units themselves are already much smaller than those built in past decades. With developable land becoming scarce and more expensive and construction costs increasing, the affordability issue can be solved only through smaller unit sizes. Witness the emerging popularity of micro-units of 300 to 500 square feet. With monthly payments often little different than the cost of renting, these units sell out extremely quickly.
Close to 70% of Canada’s adult population currently owns their home. Home ownership should remain an achievable objective.
However, for that objective to become reality for the next generation, individuals and families will need to accept the smaller, multiple-dwelling solution for much longer periods than was necessary for their parents and grandparents.
Although single-family homes will continue to exist, they will account for an ever-decreasing percentage of residential dwellings. This change in housing options is already evident in all urban centres. Across Canada, new condominium units are being added at three times the rate of single-family dwellings.
This accelerating trend is not necessarily bad.
More modest, affordable housing already works well throughout most of the world.
We can only hope that public transportation improvements will keep pace with, and efficiently support these changes.
Despite the many challenges faced by European countries, the high calibre of their transportation infrastructure is something that we can only dream about.
A retired corporate executive, enjoying post-retirement as an independent Financial Consultant (www.dolezalconsultants.ca), Peter Dolezal is the author of three books, including his most recent, The SMART CANADIAN WEALTH-BUILDER.