Dec 2017 8

Vancouver Real Estate: Wishful Thinking in November 2017

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Despite all the doom and gloom in mortgage news and desperate world news buyers and sellers in Vancouver are still singing...’Santa baby, I'm filling my stocking with a duplex, and cheques. Sign your 'X' on the line Santa baby, and hurry down the chimney tonight’...
(lyrics by J. Javits and P. Springer)

Lots of wishful thinking going on out there in the real estate market. Vancouver continues to experience above average demand and below average supply.

False Creek, foggy by Colin KnowlesFalse Creek, foggy by Colin Knowles

The sales to active listing ratio for November 2017 is 32%. By property type, the ratio is 15.9% for detached homes, 36.4% for townhouses, and 67.8% for condominiums.

In November 2017 the benchmark price for a detached home in North Vancouver was $1,697,600 up 3.7% in one year, up 79% in 5 years and up 95.1% in 10 years. In Richmond the benchmark price was $1,671,600 up 4.3% in one year, up 72.8% in 5 years and up 134.6% in 10 years. In Vancouver East the benchmark price was $1,573,500 up 6.7% in one year, up 88.6% in 5 years and up 145.1% in 10 years. In Vancouver West the benchmark price was $3,573,700 up 1.5% in one year, up 75.9% in 5 years and up 135% in 10 years. In West Vancouver the benchmark price was $3,146,100 up 2.9% in one year, up 76.9% in 5 years and up 105.8% in 10 years. Each year affordability declined for local buyers.

As prices were rising to the stratosphere the Liberal government was like the police chief in Casablanca who professed to be shocked, shocked sir, as Rick’s Cafe was raided for illegal gambling just as the croupier approached with his winnings.

NDP Attorney-General David Eby can profess to be shocked at the amount of money that was laundered through the large BC casinos but his government is happily spending their way through the $2 billion surplus in the treasury inherited from the previous Liberal government. Any government having their resource development plans held up by First Nations land claims and foreign supported environmental groups would have been relieved to make $1 billion a year from the Property Transfer Tax on real estate and several billions from the gaming taxes. Unfortunately the supervision by the gaming branch was lax by government design and no agency saw the extent of the illegal money flowing through the casinos. Once the first washing was done then the funds were largely invested in detached homes in Vancouver for the final rinse.

It’s clear that nobody in the government or outside of it appreciated the extent of foreign investment underwritten by criminal elements. When Andy Yan an urban planner with Bing Thom Architects at the time, now of Director of SFU city program, studied all the sales on the west side of Vancouver in November 2015 and correlated Chinese names that weren’t Anglicized as being foreign investors who were impacting the rising prices in the Vancouver real estate market he was called racist (he is Chinese) and loudly booed by the Liberal government and Mayor Gregor Robertson of Vision Vancouver. Now they’re all jumping on the bandwagon of trying to stabilize the prices. It’s a clear case of closing the barn door after the horse has bolted. Mayor Robertson is hoping the senior governments will allow Vancouver to restrict foreign ownership of property as is done in Australia and New Zealand.

A blue-sky idea floated almost two years ago by a group of academics offering solutions to the housing crisis in Vancouver has now come around to being considered a reasonable possibility. The concept of a property surtax according to the Vancouver Sun would take aim at ‘free-riding homeowners’. Proponents say the people forced to pay more under the change would be wealthy foreign owners who purchase Vancouver real estate to stash their money or those who avoid paying Canadian taxes in various ways. Residents paying income tax would be allowed to deduct the surtax.

The NDP government has promised a full housing report in the February 2018 Budget. Premier John Horgan has stated that housing is the No. 1 issue on his desk. All levels of government are focused on building affordable rental housing to keep families and workers in the province, especially in the Lower Mainland. It would be helpful if they outlawed shadow flipping of pre-sale condo contracts and set up the same rules as for the detached home market. They would collect more tax dollars and probably keep the price per square foot closer to the builder’s original estimate.

The Financial Post stated that the market for condo and attached properties surged in Toronto and Vancouver, as buyer interest in expensive detached homes has withered according to recent data.

In November 2017 the benchmark price for an apartment property across the region was $648,200. This was a 23.9% increase from November 2016. In November 2017 the benchmark price for a condo apartment in North Vancouver was $566,500 up 23.5% in one year, up 61.1% in 5 years and up 62.7% in 10 years. In Richmond the benchmark price was $612,900 up 27.4% in one year, up 77.2%in 5 years and 82.4% in 10 years. In Vancouver East the benchmark price was $540,300 up 23.4% in one year, up 75.2% in 5 years and up 90.1% in 10 years. In Vancouver West the benchmark price was $811,200 up 17.0% in one year, up 72.8%in 5 years and up 77.2% in 10 years. In West Vancouver the benchmark price was $1,154.700 up 17.4% in one year, up 65.3% in 5 years and up 62.3% in 10 years.

It appears that the Bank of Canada is holding interest rates steady at this time. Increases are expected throughout the New Year but right now the mortgage stress test which depends on current interest rates is still doable. According to the Financial Post the International Monetary Fund in October stated that Canada has the second highest gross debt to income ratio in the Group of 20. Royce Mendes, an economist at CIBC World Markets thinks that some of the big international organizations focus too much on one metric. The quality of the debt in Canada is high, the proportion of non-prime mortgages is 10% compared to the 33% in the US before the crash. Distribution of debt is important according to Mendes and if everyone holding debt has a well-paying job and some money in the bank then it could be managed easily. So we shouldn’t worry quite so much about mortgage debt. It would be great if the mortgage debt could be lower because property prices were lower. Wishful thinking indeed. More anon.

Wishing all of you a wonderful Holiday Season.


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