As projected in May the condo is King in June. The trend is for prices to rise continuously in the condo market because it is so in demand and the inventory is low. The detached home market has recovered in value from last summer's Foreign Buyer Tax slow down that followed its implementation but it has impacted the number of sales. Partly because prices rose and affordability dropped further. Suddenly the Hundredth Monkey Effect took hold and the buying public completely gave upon the idea of a detached home being necessary for a happy life and turned its attention to the townhome and condominium market as an alternative. There are multiple offers on almost every property. Some sale prices are 40% above last year’s sale price for a comparable unit. Condo sales all over seem to be coming out around $1000 per sq.ft. and even higher for the luxury market. The sales-to-active listing ratio in June was 24.5% for detached; 62% for townhomes and 93.2% for condos. When the ratio is above 20% for a few months it causes an upward pressure on prices.
The Aquabus making its rounds by David J Laporte
Anecdotally, as the government is still not keeping reliable stats, in Richmond and Vancouver the majority of detached home buyers seem to be from Mainland China. The home prices are higher than what most local people can afford. We are still not sure what the impact of the Chinese currency regulations will be in the long run. The problems of getting money out of China do seem to be real. However creative ways around the restrictions have worked in the past and may work again this time. According to the Vancouver Sun Juwai an important Chinese real estate website states that Chinese investors at home and abroad spent over US$100 billion on overseas property investments in 2016. Canada was in the top 5 countries after the US, Australia and Hong Kong.
In the upcoming month a lot of the historical data will be out of date because the government is stirring the pot again. The anxiety by the Bank of Canada around over-leveraged homeowners is moving the banks to require even more depth for borrowers that already are putting 20% down on their mortgage. Every mortgage transaction is going to require a stress test on the borrower to prove they can qualify fort he mortgage at two points higher than the mortgage rate that they actually receive when they apply. The consensus is that uninsured mortgages are a big risk to the financial market.
The Royal Bank has already raised its long-term lending rates for mortgages and the other banks are following suit. We may see a drop in the sales numbers as fewer people will qualify with these higher mortgage rates on the stress test. It is definitely going to put more pressure on the condominium market as it will be the only affordable source of housing.
There's also a big impact on housing expected of the incoming NDP government. The Green Party has made clear what they will support and the NDP has said that they are working for more affordable housing. The problem is that there is little land to build anything on and that is the largest component of any affordable housing program. There won’t be a Throne Speech outlining their plans until September when the new Legislature meets. Still no solution announced to the problem of appointing a Speaker from the government bench when the government NDP//Green partnership has a one vote majority.
The wildfires currently raging through the Cariboo and central BC will cause a change to government priorities. A lot of discretionary spending of the Liberal billion dollar legacy will need to be put aside to rebuild the shattered and burned communities and economy. Much of that region receives the majority of revenue through tourism which has had to be shut down as the forests burned and the towns were evacuated.
An activist Vision Vancouver councillor has been appointed the Chief of Staff for Premier-Designate Horgan. Geoff Meggs was the strategist for the successful NDP urban campaign platform in the recent election. There is going to be a lot of merging of NDP policy with Vancouver city policy. At the moment Vancouver is busy trying to implement a Vacant Home Tax and short term rental restrictions on all properties. They are trying to create more long term rentals through a huge property tax increase for any property that isn’t a principal residence and sits vacant. According to recent counts there are more than 25,000 empty residences in Vancouver. Airbnb and Expedia are considered the culprits in the lack of rental housing because so many investors would rather have short term rentals that don’t fall under the Residential Tenancy Act. Short term rentals of secondary suites, laneway homes and investment properties are now totally disallowed in Vancouver. It’s hard to predict whether investors will sell their second properties or live with the new regulations.
We are still looking good in the context of climate and political disasters around the globe. It doesn’t appear that house prices in Vancouver will fall to the Golden Mean of yesteryear. Wishful thinking all around. We will keep you posted.