Vancouver is still on its upward trajectory in sale prices and plunging to Earth on the reality of how little there is to buy and how many offers there are on every property.
October sales were 36.2% higher than the 10 year sales average for the month. There would be more sales recorded if there was more inventory available. There is still a large pool of qualified buyers in every price range who have lost out in multiple offer scenarios where properties are selling thousands of dollars over the list price.
Vancouver from a Yaletown rooftop by Alex Costin
The high end of the market is being driven by Mainland Chinese buyers according to an analysis of sales on the Westside of Vancouver where 66% of homes in West Point Grey, Dunbar, the University Endowment Lands between August 2014 and February 2015 sold to offshore Chinese buyers. The Vancouver Sun reports that 70% of all sales on the MLS in a recent six month period worth more than half a billion dollars were financed by 3 banks: CIBC, BMO and HSBC Canada. RBC has just announced that they are jumping on this offshore juggernaut that is rolling over the Vancouver housing market as it is doing in London and Hong Kong. Cities like Singapore and Sydney and Melbourne who are attractive to these buyers have more regulations in place regarding home ownership.
Interestingly the case study stats are showing that $2 million and $3 million dollar homes are being purchased by homemakers and students who are qualifying for the mortgage. There are questions being raised about a quintessentially Canadian legal form of money laundering: the customer circumvents the maximum amount of money that can be sent out of his country by using all his relatives to send the maximum amount to a Canadian bank to open individual accounts and then later transfer the funds to the principal customer or his wife or child or corporation so that half of it can be used as a downpayment on a property, the other half is left in the bank to be held against the mortgage. Lots of fees to the banks, an overheated housing market and lots of questions from the Canadian public. It will be interesting to see if the new federal government will address this issue. The BC Liberal government has been very reluctant to acknowledge any influence of offshore money on the housing market.
Surprisingly there is little tax revenue involved as many of the offshore buyers find a way to avoid the BC Property Purchase Tax; they pay no income tax on their world wide income if they are not considered to be residents of Canada. Anyone can invest in property here. Where students and homemakers own the properties the average declared income in many of the high end neighbourhoods is under $25,000 per year.
Due to the price pressure on traditional neighbourhoods in every municipality around Vancouver many local buyers are moving to condos in the city or detached homes further out. These buyers are creating higher demand and prices in areas that they would not have considered before due to commuting distance or being further from family. The East Van home prices have risen more than any other neighbourhood as local buyers move from West to East. The benchmark price for a detached home in East Van is $1,175,000 while the benchmark price on the Westside is $2,770,000. The East Van benchmark price is up 66% from 2010.
Reflections on Burrard by Vince Alongi
New condos are closing the gap in price with homes. There are long lineups to buy at the opening of any new project in Vancouver, especially on the Canada Line. However, there is strong upward pressure on all downtown condos. There are 5 or 6 buyers for every 2 bedroom unit under $800,000 which makes it difficult for buyers who require bank approval for their purchase. Banks in BC are strict in their lending requirements for resale condos and even if the buyer is taking out a conventional mortgage with 20% down the bank must approve the property. Since the leaky condo crisis of the 1990s and the new Strata Act of 2001 there have been legal requirements in condo offers. Now buyers are waiving the conditions in order to have their offer accepted. Anecdotally it seems that downsizing older buyers are competing with younger buyers for the same properties. Everyone wants to live in the heart of the city where the walkability score is 100. The downsizing buyers have cash from the sale of their house and may not choose to take out a mortgage or don’t need to write the bank approval into a Contract of Purchase and Sale.
There are many outside factors that can change the composition of the real estate market but the chief support of prices in the Lower Mainland is that there is nowhere to go and this is one of the most tolerant, safe, temperate and desirable locations in the entire world. People and money just keep rollin’ along.