May was it’s beautiful self in terms of weather and real estate. All is well in the rear view mirror. Sales were up and so were prices. The benchmark price for all detached properties increased 37% from May 2015 to $1,513,800. Sales volume of all properties would have been higher had there been more listings available. Sales were up 17.6% from May 2015. In Vancouver Westside and West Vancouver the detached benchmark for May 2016 was a jaw-dropping $3.4 million and $3.1 million respectively. Blessings abound.
Vancouver Downtown Office Buildings by Colin Knowles
Dan Morrison President of the Real Estate Board of Greater Vancouver was doing the real estate shuffle on why the stats were so good: "Economic and job growth in Metro Vancouver is out performing most regions in the country. This is helping to underpin today’s activity". Nothing about the flow of offshore money into the high end detached and condo markets. Since when did a region paying some of the lowest salaries for good jobs suddenly become awash in buyers with the required downpayment for million dollar homes?
According to master project marketer, developer and local real estate guru Bob Rennie only those lucky few whose parents won the Westside lottery many years ago and who are selling and willing to help children buy homes. The Vancouver Sun reports that Rennie in his 12th and final annual address to the Urban Development Institute made a strong case for affordability in Metro Vancouver being determined by a transit system that makes living farther from the city easy and affordable.
He recommended the city look to develop False Creek Flats as a new neighbourhood without pre-existing structures and entrenched interests that lead to intractable NIMBYism. Rennie and others believe that if a homeowner in the City of Vancouver’s established neighbourhoods like Mt Pleasant-Woodland and others place "No Tower" signs on their lawns to protest increased density then they have no right to complain that the city is unaffordable for their children.
Provincial Finance Minister Mike de Jong pointed out in the Legislature that municipal councils are undermining all plans to create new housing when existing residents complain that something new will compromise their view. He talked of a case where a developer wanted to add two additional floors to an approved project close to the Evergreen Line within the bounds of the OCP. The application was not approved because some neighbours complained about loss of view. The Sun investigated and found the municipality to be Port Moody, the number of residents at the meeting to be 20. The provincial government is going to have to offer some rules for municipalities to follow to meet the guidelines for density close to transit lines. The result of restricting redevelopment is usually a big increase in property taxes for current owners.
There seems to be a mood of protest and entitlement and pull up the drawbridge circulating around the world today. Countries, politicians and people are making decisions against their best interests in a desire to go back to an idealized time that didn’t exist even then. Brexit concerns, lone wolf self-radicalized Jihadi terrorist attacks, unrestricted money flowing into the Vancouver real estate market etc. have destabilized the world as we knew it.
Reading the tea leaves for the future health of our provincial wealth generating economic engine is a little murky. Lots of levels of government and administration feeling compelled to get involved and change the rules by which it has been operating for the past 15 years. A recent Insights West poll shows that 80% of British Columbians are outraged by the inaction of government on all levels to place any restrictions on the housing market that may have investor buyers having to pay extra taxes when they buy and leave the home empty. They are angry that CRA allows fraud by offshore investors on massive scale. The problem being that every action provokes an equal and opposite reaction.
All this interference fulfills the Law of Unintended Consequences for those it purports to help: the First Time Buyer, the Local Buyer, the longtime homeowner hoping to finance their retirement from their home equity. The Governor of the Bank of Canada is prophesying a real estate adjustment as the Canadian economy suffers from low commodity prices and the Fort McMurray fire.
Finance Minister Morneau at The Economist Canada Summit conference in Toronto, reported in The Financial Post, talked about the federal government doing a deep dive into real estate. They are looking to see real facts about the extent of the influence of foreign ownership in the Vancouver and Toronto housing markets with the goal of keeping the market healthy for Canadian buyers. Garry Marr in the Financial Post reporting on the Canada Summit states that supply is the biggest issue. Morneau states that there are 5.5 families per detached home in Vancouver and 1.8 across the country.
There are many complaints that the Vancouver market is getting more out of control as the government studies the problem of affordability and availability of housing in Vancouver. Since the election of the Liberals prices in Vancouver have risen 27%. It is a complicated equation and actions taken to date in toughening the down payment rules have appeared to make it more difficult for Canadian buyers to qualify for properties. This may slow the townhouse market as that is the go to product for middle to upper income buyers as an alternative to a detached home.
The real elephant in the room is the torrent of unregulated global capital flowing around the world and finding a friendly unregulated home in Canada. In the discussion of ways of taxing empty homes and controlling off shore investments one Millennial realtor is quoted in the Sun as responding with "This will do absolutely nothing to change housing affordability. Do you not understand how much money these foreign buyers have?"
Let’s hope the natural protective instincts of all politicians in this upcoming election season extend to the Vancouver home buyer some helpful response to the foreign money tsunami that is distorting the market and closing so many people out.