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Mac Marketing Solutions, a marketing company for developers, released an article last Wednesday about the outlook of Richmond condo market in 2015. They reported that “There are currently 35 new residential projects selling in this marketplace (mostly concrete construction) and within these projects, 80% of the homes have already sold.”

MAC Marketing expected that the demand for new condo sales in Richmond will continue to be strong in 2015. However, as more master-planned communities are being built, the increased supply of available homes could slow down the rate of absorption of these new condos.

According to their research, new concrete projects are selling around $535/sq ft to $580/sq ft depending on the location and the type of products (ie. Luxury, concrete or wood frame, etc). In addition, more end users (who buy to live in) prefer the Oval Village where it provides great value and amenities. The demographic of these end users are described as young, first-time home buyers or families that are looking to upgrade.

Where as investors (and a lot of Chinese investors) prefer to buy along No. 3 Road within walking distance to Lansdowne and Brighouse skytrain stations.

I personally find the new condos are so competitively priced that they are taking buyers away from the resale condo market. My buyers are mostly end users and after showing them both resale homes and pre-sale condos, the majority of them decided to spend a little bit of money and buy a brand new home instead of a condo even only a few years old.

Older condos do have their own benefits such as bigger floor area, bigger bedrooms and more affordable.

But as the statistics below shows, the activity in resale apartment condo is slower than the new construction in Richmond in 2015.

 

Is real estate price going up or going down? It is one of the most frequently asked questions I hear.

The Real Estate Board of Greater Vancouver (REBGV) releases a statistic package every month with information like this:

• Residential property sales in Metro Vancouver in February 2015 increased 21% as compared to the same month last year while the total number of listing decreased 11% as compared to same month last year.

• The sales-to-active-listing ratio in February was 25.7% which is the highest it has been in Greater Vancouver since March 2011.

What is the sales-to-active-listings ratio and how is it related to real estate price?

The sales-to-active-listings ratio is used to as an indicator of supply and demand because it is simple to calculate and understand. The housing price is determined by supply and demand. When the supply of homes for sale (active listings) and the demand from potential homebuyers is in equilibrium, we have a balanced housing market.

Seller’s market is when price appreciation above inflation is likely.

Buyer’s market is when price appreciation will be less than expected inflation.

Some say it is a balanced market when the sales-to-active-listings ratio is between 15% and 20-25%. A Vancouver local real estate veteran told me he has his own numbers of 12-22% as an observation after 30 plus years in the industry.

The real estate markets have some common drivers such as interest rates which are determined by inflation and economic growth. However, the real estate is very local. Drivers like demographics, income trends, population densities, net migration and share of first-time homebuyers have significant variation within a province or even neighborhoods within a city and it can lead to very different dynamics.

As a result, the BC Real Estate Association has performed a regression analysis to uncover the ratios for a balanced market in different real estate board regions in BC. In the analysis, it assumed balanced markets are markets in which home prices grow in line with inflation.

In Greater Vancouver, a balanced market has a sales-to-active-listings ratio of around 12-21%; In Fraser Valley, about 12-19% and in Victoria about 15-21%.

The REBGV reported the sales-to-active-listings ratio is 25.7% in Greater Vancouver in February. This means that for every 100 available homes on the market, 25.7 homes are sold every month and it is a seller’s market.

Let’s look at the sales-to-active-listings ratio for your city, your property type. Is it above or below the Greater Vancouver average of 25.7%? Is it a Seller’s, a Balanced or a Buyer’s Market? How is the market doing compared to last month’s ratio? Is the price going up or staying flat?

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.

Happy New Year!

Some of you may have already received the Property Assessment Notice from BC Assessment in the mail. It reflects the assessed value of your home as of the day July 1, 2014. It is used to calculate how much tax you pay for services such as police and fire protection, emergency rescue, road construction and maintenance, garbage, community centres, libraries, parks, schools and hospitals.

As real estate agents, we determined the value of your home based on similar homes that were sold in the past 3-6 months. If you are selling your home, we also look at other similar homes currently on the market to price your home strategically so when buyers comparison shop, they see the value of buying your home. The Property Assessment is only a reference and some homeowners appeal the assessments to get a lower value to pay less property tax. That’s why it is not the only number we look at when valuing your home. If you’d like a current, up to date FREE market evaluation of your home, or how your neighborhood has been performing in the past 5 years, please contact Jenny: 604-818-7317 jenny@ultimatehomeguide.ca
Remember, if you are a BC resident, you can pay less tax on your principal residence using the Home Owner Grant. See more information here.

Check out the video “2014 Year End Housing Market Update” from the Real Estate Board of Greater Vancouver here.

When looking for places to invest, Don Campbell considers:

1. Population Growth – are there more people moving in or moving out?
2. Economics – any jobs provided from major industry, oil and gas, or forestry?
3. Infrastructure – is the city moving forward by building new hospitals, parks, school, new roads?

Bedroom Community?

In a phone interview with Georgia Straight, Don Campbell, author of a number of books such as “Real Estate Investing in Canada” predicted:
Vancouver will become a bedroom community in the 10 years

• Bedroom community definition: a community with little or no major employment centres
• Vancouver has been shifting from a port town with heavy industry to more residential with retail and restaurants (providing lower-paying jobs)
• Manufacturers and distributors which provide high paying jobs are moving to Surrey, Langley and Abbotsford because of improved transportation, especially the South Fraser Perimeter Road.
• Generation Y (born around 1980s and 2000s) will need larger units as they start to have babies
• The price per square foot on 2-bedroom and 3-bedroom homes will increase more quickly over the next 10 years than 1-bedroom homes

The Real Estate Board of Greater Vancouver released a news press titled “Home Sales Activity Picks Up the Pace in September”

• September sales were 16.1% above the 10-year sales average (3^rd highest selling September over 10 years)
• Home Price Index was up 5.3% compared to September last year
• The gains in home value were mostly driven by single family houses. Townhomes and condos do not experience the same price increase.

Observations as Realtors working in the field:

• Activities have picked up after the summer. Lots buyers are out looking for homes.
• The Bank of Canada overnight lending rate stays at 1% and it is expected to remain low because of the international economic uncertainty and to encourage stronger export to translate into more business investments and hiring. Lower interest rate = more affordable homes.
• Political uncertainty in Hong Kong –  is that going to fuel people to seek safe heaven in Canada?
• Good time to sell single family house right now.
• Very good time to sell townhouse as demands are very strong.
• Good time to buy condos in Richmond right now.
• For statistics for your specific neighborhood (ie. Edmonds, Marpole, etc) please contact Jenny at 604-818-7317
• According to the City of Vancouver, they have never been so busy with all the development applications flooding in. EVER.

Where are Developers building?

Source: Colliers International

Weekly Mortgage Update

*2 year fixed @ 2.59%
*3 year fixed @ 2.69%
*4 year fixed @ 2.84%
*5 year fixed @ 2.89%
*Variable Rate Mortgage @ prime -.60%
*OAC, Rates Subject to Change without Notice. Provided by Lynn McLellan, Verico Dreyer Group as of October 8, 2014

The Latest REBGV Buyer Demographic Survey (June 2014)

Source: Real Estate Board of Greater Vancouver

What kind of homes are they buying?
#1	First time buyers					33%
#2	Moving from one property to a similar property					26%
#3	Moving from a condo/townhome to a house					10%
#4 tie	Local/domestic investor					8%
#4 tie	Moving from a house to a townhouse					8%
#6	Moving from a house to a condo					6%
#7	Moving from a condo to a townhouse					4%
#8	Moving from a house/townhouse to a condo					3%
#9	Foreign investor					2%
#10	Moving into a retirement home					1%
How did they finance the home?
#1	Conventional mortgage (25% or more down)					60%
#2	All cash					24%
#3	High ratio mortgage (less than 25% down payment)					16%
Who are they?
#1	Family with children					36%
#2	Young couple with no children					18%
#3	Single female					11%
#4	Empty nesters					10%
#5 tie	Single male					9%
#5 tie	Retired					9%
Where did they move from?
#1	Already lived in the same community					51%
#2	Moved within the Greater Vancouver area					34%
#3	Moved from outside BC (still within Canada)					6%
#4 tie	Moved from Fraser Valley area					3%
#4 tie	Moved from outside Canada					3%
#6	Moved from an area of BC outside Lower Mainland					2%