Real Estate

Real Estate in Vancouver is Still Plummeting

Detached sales prices of $1.494 million are at the low end of the downtrend established in 2017, simultaneously testing the one of the low ranges of Vancouver’s current detached market cycle. We had anticipated a tight selling range for the remaining portion of the year. However if the prices dip to $1.480 million before the year end we will have a greater probability of the market recession reaching $1.225 million (red line).

 

Detached sales which have been touted as a sign of strength has been greatly misinterpreted by the majority of Real Estate Analysts. There were 852 sales in July 2019, well below the average since 2005 of 1070. Not to mention that there could have been 1100 sales and the market would still be in a downtrend with respect to detached sales.

There were 6370 detached properties for sale in July, continuing in the upward trend of available listings throughout Greater Vancouver. Again we are well above the growth cycle of active listings. Greater Vancouver could have seen only 5275 listings in the month of July and still been in the upward trend. The average since 2005 has been 5858 available listings in any given month.

The rationale for why the market is seeing a temporary lift is due to the Stress Test Mitigation. What we mean by that is the sale prices have fallen off 18% from the peak. Meaning those that have been forced to the sidelines due to the 20% increase of mortgage qualification, can now begin to purchase. This, as we say, will be a temporary effect. Once the demand due to stress test mitigation is introduced to the market the sales will pick up and we anticipate a tighter range of average sales price. However once that buildup of demand dissipates, we will see the market continue lower.

The Detached market is still plummeting especially when you take a 1 or 2 year outlook. Eitel Insights sees a tumultuous time still upcoming for sellers, and we anticipate the market to continue lower with a test of $1.400 million in our future. If that price point does not hold we expect the market to sink lower until we see prices of $1.225 million across Greater Vancouver on an average sale price.  With inventory above historical norms and sales below, we do not see the market changing immediately. Of course with a 20 year outlook you can purchase anytime, however we offer actionable intelligence that allows our clients to purchase with real insights of short and long term market trends.

Condo Market Update

Unlike the Detached market, the condo market is at the downward trend highs. As you can see in the chart the Condo market is in the middle of the projected market cycle. With the average sale price of Greater Vancouver coming in at $656,000 the market is down 13% from the peak. We anticipate this price point decreasing over the upcoming years leading to a test of $525,000 a total drop of 30% from the peak. Before that occurs we will see tests of $635,000 and again a test at $584,000. Once both of those support lines fail to prop up the market we will see that test of $525,000.

Condo sales in July saw 1245 higher than the July of 2018, and analysts are acting like the flood gates are about to open, we see it differently. In truth the sales could have been at 1600 sales in July and we would still firmly be in a downtrend. Yes we have found our way out of the falling knife down trend, however we still are in the midst of the overall conservative downtrend depicted in the chart below.

The inventory of the condo market saw 5588 available listings across Greater Vancouver. Staying near the 4 year high in active listings. We anticipate this level to continue to grow and be the major cause of prices falling over the upcoming years. With all those presale properties eventually coming to completion. The market will be inundated with active listings, even now the realtors are continually getting emails about assignments sales because developers do not allow their buyers to publicly advertise the listing on the open market. Once the property is completed the market will sharply rise in active listings and with each new month see higher and higher inventory. Eventually leading to the cannibalization of the condo market with new properties selling with warranties and kickbacks the resale market will be forced to lower their prices to see any offers. Thus forcing newer properties to lower their prices and the vicious cycle will repeat until the market bottom likely in 2022.

Dane Eitel is the founder and lead analyst of Eitel Insights. Click here for more information.

CMHC: Toronto Real Estate “Highly” Vulnerable, Vancouver Stabilizing

as more and more three letter organizations declare Canada’s real estate prices unsustainable, Canada’s national housing agency thinks things are getting better. The Canada Mortgage and Housing Corporation (CMHC) latest report mentions improved fundamentals. The organization even went so far as to downgrade the risk in Greater Vancouver.

About The Ratings

The ratings are displayed in a color-coded scale, not unlike the US terror threat advisory scale. Green means there’s a low risk of vulnerability, that is the CMHC doesn’t see an issue. Yellow means a “moderate” risk of vulnerability, meaning it’s just breached a risky reading. Red means a “high” degree of vulnerability, and there’s a major imbalance or it’s persisted for a while. It’s pretty self explanatory when looking at individual readings….CLICK for complete article

Will B.C.’s commercial real estate prices follow residential decline?

Our friends over at Hawkeye Wealth brought this one to our attention. Some interesting insights on where the money is flowing in the real estate market. -ed.

Home prices have been in a sharp retreat in Metro Vancouver, Canada’s second largest investment market, ever since the British Columbia government introduced a foreign buyer tax in mid-2016. The concern for some is that commercial property prices will be pulled down by the residential sector. Recent price history suggests that won’t necessarily be the case, however.

When I visited Vancouver earlier this year, market participants seemed to be waiting for the next shoe to drop. With single-family homes and commercial properties competing for land, the thinking is that the decline in residential prices will bring down land values, and in turn bring down commercial property prices to the same degree as residential assets.

Historically, these price series had moved together. From 2005 to 2014 each exhibited a six per cent compound annual growth rate (CAGR) with only a few bumps and differences between the series over time….CLICK for complete article

For more from Hawkeye, head to their twitter “@hawkeye_wealth”.

Canada’s Most Splendid Housing Bubbles, June Update

June is generally a strong month for house prices in Canada, according to the Teranet-National Bank House Price Index. But this June, the index rose only 0.8% from May, compared to an average June increase of 1.2%. Once those “seasonal pressures” are removed from the index via seasonal adjustments, “the composite index would have retreated 0.4% in May and 0.5% in June,” the report said. Particular weak spots were Vancouver, Calgary, and Edmonton. But there were some warm-spots too.

Vancouver:

Just based on seasonality, house prices should have risen in Greater Vancouver, which was until mid-2018 one of the most splendid housing bubbles in the world, where house prices had more than quadrupled in 16 years. But instead, they declined in June for the 11th month in a row, according to the June Teranet-National Bank House Price Index. The index is now down 5.2% from the peak in July 2018, the sharpest 11-month decline since Aug 2009….CLICK for complete article

Half Of Greater Vancouver Can’t Afford A One Bedroom Rental

Vancouver real estate is hella expensive, but it’s become ridiculous in recent years. Canadian Centre for Policy Alternatives (CCPA) crunched the numbers to find the wage needed to rent in Greater Vancouver. Breaking down the numbers further, we see how unsustainable the region has become. The average one-bedroom is now unaffordable to over half of the city. That’s if we include distant suburbs, and it’s even worse if we don’t.

Housing Affordability

Just because you can make the payments and not go into arrears, does not mean your housing is affordable. The term “affordable” is thrown around a lot, but there’s an actual definition used by the government. For housing to be affordable, shelter expenses need to represent less than 30% of gross (a.k.a. pre-tax) income. Shelter expenses include, but are not limited to, rent, mortgage payments, utilities, taxes. This is the definition used by the CCPA to determine “affordable.”…CLICK for complete article

Ontario Loses Over 5,000 Real Estate Jobs, BC Hits New All-Time High

Canada’s real estate sector is making a shift. Statistics Canada (Stat Can) data shows FIRE sector jobs made a small decline in June. The aggregate movement was small, but most of the gains are being made in smaller provinces. Larger provinces like Ontario and Quebec lost thousands of jobs in the sector last month.

The finance, insurance, and real estate (FIRE) sector is the industry of buying and selling homes. The industry booms when asset prices rise, and/or more interest payers are added – i.e. more credit is issued. It suffers when asset prices fall, or credit growth starts to slow down. The sector becomes more important as manufacturing jobs disappear. Yes, the business of warehousing people replaces the business of producing goods. Debt driven economies, such as Canada, are increasingly dependent on this sector.

Canadian FIRE sector employment is virtually flat from the month before. FIRE seasonally adjusted employment fell to 1.193 million jobs in June, down 0.02% from the month before. This was the first monthly decline for June since 2014. The decline works out to 200 jobs, so not nearly as bad as May – when 2,300 jobs were lost. June’s movement was small, but some provinces were luckier than others….CLICK for complete article