To paraphrase Mac Davis: Happiness was Vancouver real estate prices in our rearview mirror...
The elephant in the room in today’s market is the steep decline in affordability over the past few years. The Vancouver Sun reported on the 14th annual Demographica list of severely unaffordable world wide cities. Vancouver came third after Hong Kong and Sydney. Survey is prepared by U.S. firm Demographia and New Zealand firm Performance Urban Planning. They state that Vancouver became severely unaffordable faster than any other city on the list. They measure unaffordability by the "median multiple" achieved by dividing the median house price by the median household income. It works out to 12.6 in Vancouver. A median multiple of 5.1 which means a house costs 5x the average annual income is considered severely unaffordable. In 2004 the median multiple for Vancouver was 5.3, unaffordable but manageable. Today Victoria is at 8.1, Nanaimo 7.2, Chilliwack is 6.8 and Kelowna is 6.6. Toronto is at 7.9 up from 3.9 in 2004. The most affordable median multiple in Canada was Moncton NB at 2.1.
Vancouver at Dawn by Murray Foubister
"Market activity differed considerably this past year based on property type" as stated by President Jill Oudil of Real Estate Board of Greater Vancouver. "Competition was intense in the condominium and townhome markets, with multiple offer situations becoming commonplace. The detached home market operated in a more balanced state, giving home buyers more selection to choose from and more time to make decisions."
"Strong economic growth, low interest rates, declining unemployment, increasing wages and a growing population all helped boost home buyer demand in our region last year," said Oudil.
Here we are in the New Year that is looking slightly different than the last one. 2017 ended on a bang with the second best December on record. Most of it was triggered by the impending rise in interest rates and mortgage qualification levels.
The activity in the townhome market has already burst its bounds. A 3 bedroom + den townhome in Langley listed in the low $500ks attracted 23 offers and sold substantially over the list price. Local buyers cannot get a break anywhere.
Foreign buyers and investors are blamed by many for overheating the market. Calls have been made to follow New Zealand in forbidding any foreign ownership of real estate in that country. Diane Francis of the Financial Post supports this position and makes the point that Canada is clueless about the extent of foreign manipulation of the real estate market. Premier John Horgan who is now in the position of leading the entire province, not just the political left, has stated that BC is the gateway to Canada and it is not planning to restrict foreign investment.
Douglas Todd of the Vancouver Sun writes regularly on immigration and the lack of responsibility that the federal and provincial governments have shown for overview and supervision and enforcement of immigration and financial services laws including those concerning money laundering.
There has been so much discussion with so little concrete information that a recent court case between two wealthy immigrant Chinese families has surprised everyone with its details of the illegal scams some immigrants to Canada use to become citizens. Douglas Todd did a full report on the judge’s ruling.
There appears to be some blowback from exposes about immigration fraud and tax evasion around real estate. The BC Real Estate Council is expected to be more forceful in charging realtors who enable clients to avoid the law.
The sales to active listing ratio for December 2017 is 29%. By property type, the ratio is 14.4% for detached homes, 38.8% for townhouses, and 59.6% for condominiums.
In December 2017 the benchmark price for a detached home across the region was $1,605,800. A 7.9% increase from December 2016. In December 2017 the benchmark price for a detached in North Vancouver was $1,679,700 up 5.2% in one year, up 81.7% in 5 years and up 92.6% in 10 years. In Richmond the benchmark price was $1,692,500 up 7.1% in one year, up 78.4% in 5 years and up 136.9% in 10 years. In Vancouver East the benchmark price was $1,559,900 up 7.1% in one year, up 88.2% in 5 years and up 141.6% in 10 years. In Vancouver West the benchmark price was $3,556,100 up 3.3% in one year, up 77.2% in 5 years and up 132% in 10 years. In West Vancouver the benchmark price was $3,093,200 up 4.0% in one year, up 73.6% in 5 years and up 102.4% in 10 years.
Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of inventory.
In December 2017 the benchmark price for an apartment property across the region was $655,400. This was a 25.9% increase from December 2016. In December 2017 the benchmark price for a condo apartment in North Vancouver was $560,600 up 22.2% in one year, up 62.4% in 5 years and up 60.5% in 10 years. In Richmond the benchmark price was $637,200 up 31.7% in one year, up 86.3% in 5 years and 88.9% in 10 years. In Vancouver East the benchmark price was $545,600 up 25.4% in one year, up 79.9% in 5 years and up 90.7% in 10 years. In Vancouver West the benchmark price was $807,100 up 20.2% in one year, up 73.4% in 5 years and up 75.8% in 10 years. In West Vancouver the benchmark price was $1,171,000 up 19.5% in one year, up 65.0% in 5 years and up 65.6% in 10 years.
The Provincial Budget will be introduced in the Legislature in February. Premier John Horgan and Finance Minister Carole James have stated that new rules to curb speculation in real estate will be presented then. We shall see. More anon.