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Metro Vancouver Real Estate Market Stabilizes 

After a slow start at the first half of 2019, the real estate market in Greater Vancouver seemed to be picking up in the summer. In October, home sales were 9.8% above the 10-year October sales average.

In November, home sales dropped to 4% below the 10-year November sales average as the holiday season is approaching.

If we look at supply and demand, the sales-to-active-ratio for all property types had increased enough in October to push the single family house market in Metro Vancouver from a buyer’s market at the beginning of the year to a balanced market since October 2019. For both townhomes and condominiums, the market had returned to seller’s market from a balanced market although the prices were not as high as last year.

The implementation of the speculation tax, the more stringent mortgage stress test, restriction on farmland build-able square footage and continued tightening of money coming out of China were the many government and international factors that held off buyers at the sidelines at the beginning of this year. As a result, we see home prices drop about 10% across the board. The big banks started to market promotional interest rates to attract buyers.

Since summer 2019, we see buyers coming back into the real estate market.

“Home buyers have more confidence today than we saw in the first half of the year,” says Ashley Smith, REBGV president. “With prices edging down over the last year and interest rates remaining low, hopeful home buyers are becoming more active this fall.”

Another interesting trend we see is that the home price index for condominium is in line with single family houses in 2019 (see graph below). The condo market has been so hot for so long while the detached home market has been slow for several years. As a result, the price of condo is catching up to the price of single family home. It might be a great opportunity for condo owners to upgrade to single family houses. Or simply a great time to buy detached homes. For example, someone with a condo in Vancouver may be able to sell it and buy a single family home in the suburbs like Richmond or Burnaby.


Click on the links below to see some predictions for the coming year in real estate:

B.C. housing market to stabilize in 2020, accelerate in 2021: federal report

Home sales across B.C. to rise 10.9% in 2020: forecast

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September 2019 Real Estate Market Update

 

The Real Estate Board of Greater Vancouver (REBGV) reported that home sales increased 46.3% in September 2019 from September 2018.

Compared to the same month last year, home inventory (home listed for sale) stayed relatively the same. As a result, we see the rise in overall Sales-to-Active listing ratio from the same month last year (see Table below).

Sept 2019 Sept 2018
Sales 2343 1601
Inventory 13414 13800
Sales-to-Active listing ratio 17.4% 11.6%

REBGV president Ashley Smith said: “Home buyers are more willing to make offers today, particularly in the townhome and apartment markets.”

We started to see a downward trend in sales to active ratio since reaching a high point of 48% in May 2017. The ratio reached its lowest of 10% in January of this year and started to climb up slowly again (see graph below).

For all property types, the sales-to-active listings ratio for September 2019 is 17.4 per cent. By property type, the ratio is 12.7 per cent for detached homes, 18.9 per cent for townhomes, and 21.9 per cent for apartments:

Recently, we helped empty nesters sell their family home and downsize into a condo or townhouse. We helped couples sell their condo and move into a larger home because there’s a new member in the family. People want to move closer to their family/job. People are selling because of divorce/separation. These are all the common reasons why people buy and sell real estate. Business was as usual in the past few months.

Although sellers cannot expect to fetch higher and higher price as we’ve seen in the past couple years (see graph below for Average Sales Prices). Buyers on the other hands have more selection and time to make purchasing decisions.

The Federal Election is coming up in 2 weeks on Oct 21.
Check out the different parties’ platform on housing and other issues here:

https://www.macleans.ca/politics/2019-federal-election-platform-guide-where-the-parties-stand-on-everything/

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Real Estate Activity Picked Up as Price Decreases

 

This summer, real estate activity increased as compared to the first half of 2019.

“Home sales returned to more historically normal levels in July and August compared to what we saw in the first six months of the year,” said REBGV President Ashley Smith.

Buyer activity had increased, although sale is still below the 10-year aveage.

The sales-to-active listings ratio for August 2019 is 16.7%, a slight decrease from the 18% in July 2019 in Metro Vancouver. The ratio is in the balanced market range. For a breakdown of ratios for different property types, please see the table below:

The ratio also varies in different areas in Metro Vancouver. For example, we are seeing the condos in Brentwood are sold fairly quickly if priced well.

For condos, the sales-to-active listings ratio for both July and August 2019 had surpassed the 20% market.

According to analysts, if the ratio surpasses 20% for several months, we often see an upward pressure in price.

Sales of condo increased 8.9% in August 2019 compared to the same month last year. The benchmark price of condo decreased 7.4% from same month year to $771,000. Although sales went up, inventory was also up, making sales-to-active listings ratio lower as compared to the heated seller’s market a few years ago (hence the lowering in price).

Condominium remained in higher buyer demand as compared to other property types due to its lower price point.

Buyers still benefit from the low interest rates, increased inventory and reduced prices in this balanced market.

On September 4, 2019, Bank of Canada left the benchmark interest rate unchanged at 1.75% as trade war between China and the US was doing more damage on Global economy than forecasted in July 2019.

The Top 6 Things That Will Impact Fall Real Estate in Canada

The Decrease in The Bank of Canada’s Mortgage Stress Test is Great News

 

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June 2019 Real Estate Market Update

According to the Real Estate Board of Greater Vancouver’s stats report, housing sales last month was the lowest selling June since 2000. It was 34.7% below the 10-year June sales average.
Same with the previous two years, home sales had reached their peaks in May before leveling off in June (see graph below):

Home inventory continued to accumulate as home sales started to level off.
When we look at supply and demand with the Sales/Active Ratio graph below, we see the market had returned to the balanced market level in 2013-2014 before the boom started in 2015 when home inventory dropped to a all time low at the end of 2015.

It had been a very strong seller’s market for the past four years. Buyers didn’t have much selections to choose from and they had to act very quickly to secure any deals. Now in this balanced market, buyers can finally take the time to do the normal due diligence expected when buying a home such as doing inspections, having financing subjects, etc.

As for sellers, homes are still selling but the asking price has to reflect the current market. We look at comparable homes that had been sold in the past 30-days to determine the current market price of a home. The tax assessment only reflect the price of June 1st of last year.

According to Kim Spencer, the manager of the Real Estate Board of Greater Vancouver’s Professional Standards Department, he had seen the real estate market slowed down like this three times in his real estate career.

Real estate market is cyclic. It always has ups and downs both in the short-term and in the long-term. The sales numbers, home inventory, sales/active ratios, the price all go up and down.

But in the long run, home prices generally go up (graph below). Even when the price dips down, it never goes back to the price at the beginning. How we wish that we can go back in time and buy single family houses at $400,000! That’s why they say, don’t wait to buy real estate. Buy real estate and wait!

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May 2019 Real Estate Market Update

According to the Real Estate Board of Greater Vancouver’s stats report, housing supply had reached 5-year high in May 2019.

REBGV president Ashley Smith said: “High home prices and mortgage qualification issues caused by the federal government’s B20 stress test remain significant factors behind the reduced demand that the market is experiencing today.”

Home sale had increased 44.2% in May as compared to the previous month (April 2019) but compared with May last year, home sales had decreased 6.9% (total 2833 sales recorded in May 2018)

May 2019: Total 2638 home sales
April 2019: Total 1829 home sales
March 2019: Total 1727 home sales
February 2019: Total 1484 home sales
January 2019: Total 1103 home sales

As expected home sales had picked up in Spring but it had not reach the frantic heights as in past years (see graph below):

The Sales-to-Active Listings Ratio that reflects both home sales and inventory in May 2019 were as below:

The Sales-to-Active Listings Ratio for both townhomes and condominiums had reached 20% last month (May 2019). If the ratio surpasses 20% over several months, home prices generally go up according to analysts. It is a great time for buyers of all property types as there are more inventory to choose from and the our real estate market seemed to be very healthy (with no signs of a crash).

If we look at the Sales-to-Active Listings Ratio in different areas, for condominiums, we see a different types of market:

North Delta:           30.0%  seller’s market
Vancouver East:    28.2%  seller’s market
Coquitlam:             24.9%  seller’s market
Surrey:                   23.6%  seller’s market
Metro Vancouver:   21.2%  seller’s market
Burnaby:                19.7%  balanced market
Vancouver West:   18.9%  balanced market
Richmond:             14.9%  balanced market

The Bank of Canada held its overnight rate at 1.75% which kept the bank interest rates at 3.95%. Unlike the central bank’s previous statements, there had been no mention of further increases as the economy had nearly ground to a halt at the beginning of this year.

Bank of Canada holds key interest rate at 1.75% (May 29, 2019)

To read the May 2019 stats report from the Real Estate Board, click here.

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March 2019 Real Estate Market Update

The Real Estate Board of Greater Vancouver released a stats report saying that March 2019 home sales were 46% below the 10-year March sales average and was the lowest total for the month in three decades.

Home sale is the number of transactions that took place in a month.

March 2019: Total 1727 home sales
March 2018: Total 2517 home sales
February 2019: Total 1484 home sales

Although sales in March was down from March last year or any month of March since 1986, home sales were up 16.4% from February 2019.

Below is a graph of homes sales in Greater Vancouver since 2005.

The number of home sales go up and down every year as activities pick up in the Spring and cool down as year end approaches. We can see that home sales are picking up a little bit since the beginning of this year.

The sales number does not take into consideration of inventory. The sales to actives ratio is calculated by dividing home sales number by the number of active listings on the market in order to measure the balance of supply and demand.

For example, in March 2019 in Greater Vancouver for all property types, the sales to active ratio is:

1,727 home sales / 12,774 active listings = 0.135 or 13.5%

In another word,

12,774 active listings / 1,727 home sales = 7.4 months of inventory available

Some statisticians say that it is considered a buyer’s market when there are more than 6 months of inventory available in a give time. A balanced market has 4-6 months of inventory available and it’s a seller’s market when there’s less than 4 month’s inventory available.

From the graph below, we see the sales to active ratio since 2005 for the same time frame as the sales number graph above. We have not see such a strong seller’s market as the one we experienced in 2016 in ten years. The best buyer’s market was during the world financial crisis in 2009 (data available from 2005).

Sales to active listing ratio for March 2019 in Greater Vancouver fro the following property types:


Sources: Real Estate Board of Greater Vancouver

REBGV president Ashley Smith said “Housing demand today isn’t aligning with our growing economy and low unemployment rates. The market trends we’re seeing are largely policy induced. For three years, governments at all levels have imposed new taxes and borrowing requirements on to the housing market.”

“What policymakers are failing to recognize is that demand-side measures don’t eliminate demand, they sideline potential home buyers in the short term. That demand is ultimately satisfied down the line because shelter needs don’t go away. Using public policy to delay local demand in the housing market just feeds disruptive cycles that have been so well-documented in our region.”

To read the March 2019 stats report from the Real Estate Board, click here.

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Increased Home Supply and Below Average Demand from Home Buyers in February

We are seeing the effect of increase mortgage interest rate and government involvement on curbing the rapidly rising of home prices in Greater Vancouver.

Compared to the same month last year, we saw a 32.8% decrease in homes sale. But compared to the previous month, we see a 34.5% increase in sales.

The market is not as hot as last year but it is picking up as Spring is approaching. Year over year, the market usually does better between March and June. We still see some multiple offers in Downtown Vancouver and Burnaby’s condo market but we also see a lot of price reductions.

As we can see in the sales-to-active listings ratios for February 2019 below, the townhouse and condo markets are now in the balanced market, meaning home buyers have more choices and face less pressure to act very quickly and sellers can still expect too sell if the home is reasonably priced. As for single family homes, buyers now still have more advantages over sellers. It is a great time to buy single family houses.

Sources: Real Estate Board of Greater Vancouver

If we look at the sales-to-active listings ratio for the past 10 years (graph below), we can see that the most recent seller’s market in 2017 did not reach the height it did in 2016!

People often ask us which way the market is going in all kinds of markets. Our answer is always “we don’t know in the short term”. As we can see from the graph above that ratio dropped suddenly at the 2nd half of 2016 and jumped up sharply at the beginning of 2017. It was only half an year in between that the supply and demand changed direction and then changed again.

If we look at the HPI price over the past 10 years, we see that the price has dropped to around the level in June/July 2017 which is still higher than at the peak of the market in 2016. For seller’s I think it is still a good time to sell because the price is still as good as back in summer 2017 when the ratio was at its most recent height.

People generally want to buy at the bottom and sell at the peak of any given market but as we can see above, the tide can change very quickly and selling anywhere near the peak is good enough for me.

As for buyers, when the price bottom out in January 2017, it never went below the price in May 2016 when the price was still rising steadily. I don’t think the price will ever go back to the level 10 or even 5 years go when the average home price for all property types in Metro Vancouver was about $600,000.

Even during the world financial crisis in 2008-2009, the price bottom out at $500,000 which was still higher than merely 4 years earlier in 2005 at $400,000. So for the longer run (5 years and more), real estate prices generally go up. So for buyers, it is usually better to buy earlier than later if you are buying and holding on to the property long term and the numbers make sense for your particular financial situation.

For the February stats package from the Real Estate Board, click here.

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New Tax in BC – The Speculation and Vacancy Tax

The BC government announced last October that a new “Speculation and Vacancy Tax” will apply to people who own second and vacant homes in the taxable areas of BC including Metro Vancouver as of December 31, 2018.

The “Speculation and Vacancy Tax” is a new tax introduced by the NDP in an attempt to curb the high prices of real estate. It is different from the City of Vancouver’s Empty Homes Tax effective on January 1, 2017 that only applied to homes in the City of Vancouver.

Vanoucver “Empty Homes Tax” and BC “Speculation and Vacancy Tax” are two separate taxes.

Each owner who has residential property in affected area in BC will receive a letter in the mail by the end of February with instructions on how to complete the annual declaration and to claim any relevant exemptions. The declaration must be completed by March 31, 2019 and each owner must complete an declaration.

The BC government promised that most homeowners in BC will be exempted (please see below link to see if you are exempted). If you have a special situation, please contact your tax professionals and accountants to verify.

IMPORTANT LINKS:

News articles about the new tax:
Two taxes have B.C. property owners scratching their heads

BC speculation and vacancy tax declarations due at the end of March

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Buyer demand remains below historical averages in the Metro Vancouver

  • Number of home sales decreased 42.5% from November last year, and was 34.7% below 10-year November average (lowest sales for the month of November since 2008)
  • Sales to active ratio for all property types was 13% (balanced market)
  • Detached homes 8.9% sales to active ratio (buyer’s market)
  • Townhomes 14.7% (balanced market)
  • Condos 17.6% (balanced market)

“Home buyers have been taking a wait-and-see approach for most of 2018. This has allowed the number of homes available for sale in the region to return to more typical historical levels,” “This activity is helping home prices edge down, across all property types, from the record highs we’ve experienced over the last year.” Phil Moore, REBGV president said.

See video here:

As REBGV president Moore said “We’ll watch conditions in the first quarter of 2019 to see if home buyer demand picks up ahead of the traditionally more active spring market,“

The Bank of Canada kept its overnight rate unchanged at 1.75% on December 6. Experts no longer expect the Bank of Canada to increase its policy interest rate in January 2019. They are more likely to wait until Spring 2019, to see if their growth narrative is back on track.

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Inventory of homes for sale return to level unseen in four years

This means now the buyers have more selections to choose from and will be less likely to have to buy in a hurry. The sellers may face more competition from other homes for sale in the area.

“Home prices have edged down between 3-5%, depending on housing type, in our region since June,” Phil Moore, REBGV president. “This is providing a little relief for those looking to buy compared to the all-time highs we’ve experienced over the last year.”

It has been an interesting year in real estate. It was red hot in the condo and townhome market at the beginning of 2018. Then it suddenly cooled down in the summer months and it warmed up a little bit over the fall as people are returning from their summer vacations. Now that we are entering the winter holiday season, we feel the market slowing down again.

On the other hand, we are getting a lot of calls from developers and their marketing companies about their new pre-sale projects that are coming out. A lot of new home developments are completing with buyers moving in this year. So the developers are starting their next wave of homes to be finished in the next 3 to 5 years. Buyers may have more selections and negotiation power now that the developers are trying to push their pre-sale projects.

So what is the market going to be like for the next few years?

According to this article, Market indicators and what to watch for, if home builders and developers are putting up money to get projects going, it is a good indication that there is demand.

Whether you are buying resale or pre-sale homes, be clear on the reason why you are buying and know your exit strategies in different market conditions before you buy to protect yourself.