It has been a roller-coaster ride in the real estate market this entire Winter-Spring. The surge in March activity and prices has been like clanking to the top of the loop before your insides go sailing off into the stratosphere in the rush over the top.
Demand is there, particularly in the detached segment, in Vancouver and close-in suburbs. The benchmark price is over $1million in East Van, Richmond, North Vancouver and Burnaby and well over $2 million in Vancouver Westside and West Vancouver.
Vancouver by Gavin Craigie
Buyers are finding creative ways to get into the market through the Bank of Mom and Dad, sharing ownership with family or friends, using equity from a previous purchase or mortgaging themselves to the hilt. People from every part of Canada and the world want to live in Vancouver for a multitude of reasons. One main one for Canadians was illustrated this year when cherry trees were blooming in Vancouver while the ROC was suffering record breaking cold and snow.
Barbara Yaffe of the Vancouver Sun writes regularly on real estate. When describing who is buying expensive real estate where in Vancouver she suggests it is the Baby Boomers in the $2 million-$5 million price range on the Westside who are upsizing to larger homes or rightsizing to spacious high end condos and townhomes. Many older owners are cashing out to help family to purchase properties.
Gen X is pushing up prices on the Eastside into the $2 million range, some with family assistance. There is such demand there that an updated Eastside property near Main & King Edward listed at $1,598,000 sold in March for $2,165,260 in multiple offers.
Gen Y has created more activity in the condo market because of their preference to live and work near transit and amenities. As first-time buyers they require more financial help to purchase a home.
These buyers are also being impacted by a 15% rise in mortgage insurance fees for downpayments below 20%. It's being aimed at highly leveraged buyers in Toronto and Vancouver but applies across the country in less robust markets too. Mortgage insurance fees mainly underwritten by CMHC guarantee the lenders against loss. It is not to be confused with mortgage life insurance payable to the estate of the borrower.
There was a newspaper story this week about a young man growing up in Lynn Valley North Vancouver where his parents bought a 2400 sf detached home for about $350k in 1996 and where he bought a 1 bedroom condo for $350k in 2015 with money he diligently saved for a 20% downpayment. He is the first of his friends to move out of their parents' home into one of their own. Different generations, different expectations.
It seems counter-intuitive that as the drop in world oil prices impacts the Canadian economy that so many would extend themselves to buy a place to live in Vancouver or Toronto, the two rising real estate markets. Every economist attributes it to the historically low mortgage interest rates that are a result of the Bank of Canada monetary policy. The corollary in Vancouver is the low low vacancy rate combined with high high rents is encouraging people who can do so to get into the market.
The Conference Board of Canada published a report called Metropolitan Outlook1: Winter 2015 which projects Vancouver as having a diversified economy and BC enjoying a GDP of 2-3% through 2019. They are forecasting immigration growth to rise from 30,000 per year to 42,000 per year in 2019. This will keep real estate prices high in Metro Vancouver with its limited land base for expansion.