Month: February 2015

Last Thursday, we went to an event “Red Talks” sponsored by the developer Wesgroup. Over 600 Greater Vancouver realtors attended this event where they invited four real estate experts from other countries around the world to talk about real estate in their market area and what they thought of the Vancouver real estate market. Wesgroup took the four real estate professionals on a tour to see some of their projects including Brewery District in New Westminster, River District in Vancouver and other developers’ projects like Vancouver House and Trump Tower Vancouver.

It is very interesting to hear the experts talk about their real estate markets and see their perspectives on the Greater Vancouver housing market.

The four real estate experts invited to be on the panel were:

Josh Flagg – from the reality TV show Million Dollar Listing Los Angeles. Josh talked about working in Hollywood and selling homes for celebrities. He is selling a $150 million home right now that was once owned by Cher. He also talked about Los Angeles having more single family homes and not a lot of demand for condos. He thinks the market in Vancouver is under priced.

Alan Child – Knight Frank Hong Kong, a global real estate consultancy. Alan talked about the “stamps” aka taxes imposed on buying properties in Hong Kong, the most unaffordable city in the world, to hamper flipping activities and that pretty much put a halt to the real estate market.

Stephen Hurford – London’s leading development consulting and marketing firm. He also thought the Vancouver housing market is undervalued compared to places like London or Russia and how difficult it is to get into real estate for the local people that 60% of new developments were sold first oversea. The government now requires any new development to provide 35% of social housing that is integrated throughout the building.

Brendon DeSimone – New York City realtor and designated real estate expert for national media such as CNN. Brendon talked about 90% of real estate in NYC are Co-op where each owner in the building owns a share of the building. The members of the Co-op can screen and select who may live in the building. That’s why it is very difficult for foreigners to buy Co-op because the member can reject anyone with any reason. So the only option for foreigners to invest in NYC is to buy market condos and the minimum price for a one bedroom starts at US$ 1 million.

All the experts think real estate is undervalued in such a beautiful city like Vancouver. Today, you can buy a one bedroom condo in a high rise concrete building in Downtown Vancouver for $328,000 (18 years old, 534 sq ft). The monthly payment for a conventional mortgage on this home is $1241.80 where as the same unit is rented for 1600 per month! Alternatively, you can buy a brand new 537 sq ft 1 bed condo in a concrete high rise building in Vancouver downtown for $335,900.

So what‘s the talk about Vancouver being the 2^nd least affordable city in the world? Affordability is calculated based on medium home price divided by medium household income. In the 3^rd quarter of 2014, Vancouver has a medium price of$ 704,800 and medium income of $66,400. Whereas San Francisco has a higher medium price at $744,400 but their household income is also higher at $81,200 hence more affordable. Here in Vancouver, we are seeing more and more social housing in new developments especially in Downtown Vancouver. Our government is giving incentives to developers to build more social housing to deal with the affordability situation but unlike London, these social housing are usually limited to lower levels of a building or on a separate building and are usually only about 10% of total units instead of 35%.

Home sales in January 2015 are 14.9% higher than the 10-year average of the same month in Greater Vancouver. Buyers are still actively buying homes while the number of homes listed for sale is lower than average. We are starting to see more multiple offer situations and just this week, we’ve seen in our office the following multiple offer bidding war:

• #105-825 W 15th Ave Vancouver, a 25-year old, 2-bedroom townhome without renovation: Asking $529,900, Sold to subject free offer for $580,000.
• 9111 Holmes St. Burnaby, a 60-year old detached house, asking price $828,000, TEN competing offers, Sold subject free for $885,000.
• 1163 W 38th Ave Vancouver, a 73-year old detached house, asking price $3,088,000. Sold in six days for $3,830,000.

REBGV president Ray Harris said: “While demand remains steady, we’re seeing fewer homes for sale at the moment. This is creating greater competition amongst buyers, particularly in the detached home market. The number of detached homes listed for sale today is the second lowest we’ve seen in four years.” The REBGV report also pointed out the sales-to-active-listings ratio is 17.7% which indicates a balanced market.

However, if we break down the sales-to-active-listings ratio even further into Vancouver, Burnaby, Richmond, Single family house, townhouse and condominiums, the ratio can provide even more interesting information (see chart below):

For example, it’s a seller’s market for Single family houses in Vancouver and Burnaby whereas it is a balanced market in Richmond. Two of the multiple offers situation we’ve seen this week happened to be in Vancouver and Burnaby. From the ratio, we see that the Burnaby townhouse market is an even hotter seller’s market at 34%. In January, there were a total of 138 townhomes for sale in Burnaby and 47 were sold last month. At this rate, all the townhome inventory will be sold in 3 months if no more townhome come onto the market in Burnaby! On the other hand, the condo market in Richmond is tipping towards a buyer’s market so buyers who are looking to purchase a condo in Richmond may have more room for negotiation.