Vancouver House by Joe Mabel
The real estate market in Canada is currently heavily influenced by outside factors — namely, by Chinese, European, and U.S. economical development. Since the European markets seem to be in a state of flux, it’s prudent to expect more uncertainty from the European economy for the rest of 2012. Additionally, some analysts are predicting that the mighty Chinese market is likely to correct sooner rather than later due to its artificially inflated currency. U.S. markets on the other hand, seem to be edging towards a slow recovery, and are projected to hit pre-recession levels soon.
Here in British Columbia, predictions aren’t showing any steep corrections; however, sometimes it’s better to take economic advice with a grain of salt. One could argue that economic predictions are much like weather forecasts - so if all goes well, you could say that BC is currently showing sunny skies for the remainder of 2012.
Jobs are looking good, with projected increases predicted mainly for the full-time sector, where average weekly wages are said to have increased by 3.5 per cent since the beginning of the year.
Housing demand is still high, coming largely from international immigrants settling in Vancouver (and including many more nations beyond China, like the US for example). Residential building permit values have increased compared to last year and according to the CMHC housing market outlook report, it is likely to continue the upward trend in the coming months.
Mortgage Rates and Labour Market Indicators
Mortgage Rates are an important signaling factor when it comes to the health of the real estate market in any city. If mortgages remain at these historically low levels for the rest of the year, they will continue to artificially boost housing activity and the situation could become unmanageable. In June, Finance Minister Jim Flaherty unveiled major changes to lower the lending limits and values that the Canada Mortgage and Housing Corporation is allowed to insure, utilizing new mortgage rules to effectively cool the housing industry after numerous experts expressed their opinion that it had become too hot for long term sustainability.
Mortgage rates are identical for all of areas of Canada; the percentage for a five-year term being 5.24 per cent, with a rate of 3.2 per cent for a one-year term. Both indicate decreasing mortgage rates compared to numbers seen at the beginning of the year.
In Canada this year, one of the major factors influencing the housing market has naturally been employment - which has grown by 1.1 per cent (197,200 jobs) since the New Year. Full-time employment rose by 1.3 per cent, however part-time jobs only rose by 0.5 per cent. The unemployment rate has been decreasing as well, reaching 6.4 per cent in June — almost a 1 per cent drop compared to the same time last year. The participation rate reached 66.7 per cent and average weekly earnings reached $853 CAD.
Condo Market Situation
Vancouver Condo by Wisley
Some of the predictions made half a year ago about the Vancouver condo market have come true. As Chinese investors withdraw from the condo market and single family dwelling sales having decreased significantly on the West Side of Vancouver, the Greater Vancouver Real Estate Board admits that it’s become more of a buyer’s market, and the probability for correction is high.
A trend exploitation analysis shows a weary picture for those who planned on selling their condo in the upcoming year. Although prices are holding for now in most markets, a strategic analysis for Greater Vancouver Condo Market Overview advises to sell now — before the market begins to correct.
In June, the apartment/condo market increased in completed units as well as those under construction compared to previous years; however, the activity wasn’t higher than numbers recorded in recent months. There were 12,917 apartment condominiums under construction as of the end of June, 2012. There were 3,262 apartment condominium completions year-to-date to the end of June. The level of completed and unabsorbed new units has remained relatively unchanged: 1,635 units recorded at the end of June, the same number as the past two years.
As correction pressure on the Vancouver market is gradually increasing, people are talking more and more about affordability. Home prices have continued to rise in price compared to last year, making it very challenging to own a home in Vancouver. The Royal Bank of Canada recorded up to a 3 per cent increase of home prices in 2012, yet monthly resales dropped by 17 per cent compared to the ten-year average.
Residential Activity in the Second Quarter of 2012
- Number of Sales – 8,132
- Year/Year (%) – -18.8 (from 10,018 )
- Number of New Listings – 19,085
- Average Price ($) – 724,319
- Year/Year (%) – -11.5 (from 818,721 )
Rental Housing Stats for Vancouver
- Private Apartment Average Vacancy Rates (Percentage)
In spring of 2012, the Vancouver Vacancy rate remained between 2 and 3 per cent, reaching 2.3 per cent for bachelor suites, 2.5 per cent for one-bedroom condos, 2.9 per cent for two-bedroom condos, and 2.4 per cent for 3+-bedroom condos in April.
- Private Apartment Average Rents (Value)
Toronto and Vancouver offered similar rental rates per month in the late spring. In Vancouver, you’d pay on average $854 for a bachelor, $965 for a 1-bedroom, $1,210 for a 2-bedroom, and $1,357 for a 3+-bedroom apartment. The average overall price reached $ 1,013 for a single person to live in Vancouver. And realistically, that would be a suburban unit that likely involved a commute ~ not prime Yaletown apartments.
I supposed we will all have to wait and watch what actually happens in the market. No one has a crystal ball; but market analysts tend to at least offer a fairly accurate glimpse at what might lie ahead. Ultimately, people will always have to buy and sell their homes ~ so the crux of the issue is understanding and leveraging your own unique positioning in the market you find yourself in.
I remember back in the early part of the 2000's - analysts were projecting a correction for years before it finally came in 2008. While I agree that a significant correction is likely on the way, we'll all just have to wait and see how international markets and the US economy affect Canadian housing prices.
What I know for certain is that for many buyers, finding a great home at a great price might be just around the corner ~ especially if you are in sound enough shape to weather the interest rates that are likely coming down the pipe. I'm in the same position, having been recently married and now looking to upgrade from our little bungalow to a family-worthy single family dwelling. I'll keep you posted if I have any aha moments.