Life can only be understood backwards, but it must be lived forward.
- Soren Kierkeggard
There are lots of buyers and sellers out there wishing they had understood the backwards view going forward in the real estate market. Even as the market rose higher and higher in 2016 and 2017 there were portents that foreshadowed today’s pause in real estate sales. The federal mortgage stress test starting January 1, 2018 has decimated the consumers ability to buy a home. This measure was announced with support from the big banks who now can’t believe their mortgage business has so greatly declined. The provincial NDP government came to power in a coalition with the Greens to announce that they would oppress the housing market till it went low enough that everyone could afford to buy a home. The new taxes are unevenly applied but have nonetheless left homeowners without the market tools to sell their homes.
The Haider-Moranis Bulletin of February 20, 2019 has suggestions on how to heat up the frozen housing market. There’s a general consensus that the mortgage stress test has overshot it’s target. One popular solution is to increase amortization periods to 30 years despite the unintended consequence of higher interest payments on the mortgage leading to higher consumer cost. Such a move may inflate sale prices but would allow the market to move again.
Vaughn Palmer of the Vancouver Sun analyzed the NDP budget and has concluded that there are clouds on the economic and fiscal horizon. He considers housing starts the canary in the coal mine for both affordability and residential construction. The government is forecasting a drop of 30% in housing starts in 2021 compared with when they took office. This includes a loss of tens of thousands of units and untold jobs and economic activity. The new social programs are burning through the $2.5 billion surplus inherited from the previous Liberal government while declining house sales have reduced the income from the property transfer tax by $600 million and counting. LNG revenues are supposed to save the day but there are clouds on that horizon too.
It appears that some of the First Nations are not cooperating on LNG development and the new mandate from the NDP to incorporate the terms of the UN Declaration on Rights of Indigenous Peoples into BC law will make it even more difficult to negotiate an agreement to enter tribal lands to develop LNG pipelines. As Vaughn Palmer states there is an ambitious commitment with very few treaties in place.
Vancouver by Goran Vlacic
Detached homes sales have declined 30.4% compared to January 2018. The detached benchmark price across the region is $1,453,400, a 9.1% decrease from January 2018. This includes an 8.3% decrease over the past six months.
Townhomes are desirable to downsizing buyers but the drop in the numbers of sales of detached homes has put many buyers plans on hold. Attached sales numbers are down 35.7% from January 2018, The benchmark price across the region is $800,600, a 0.5% price decrease compared to January 2018. This includes a 6.2% decrease over the past six months.
Condominiums which were the choice of first time buyers in 2017 have been heavily impacted by the mortgage stress test and rising interest rates. Apartment sales numbers are down 44.8% from January 2018. The regional benchmark price is $658,600, a 1.7% decrease compared to January 2018. This includes a 6.6% decrease over the past six months.
"Realtors are seeing more traffic at open houses compared to recent months, however buyers are choosing to remain in a holding pattern for the time being" as stated by Phil Moore President, Real Estate Board of Greater Vancouver. "Home prices have edged down across all home types in the region over the last seven months."
The sales to active listing ratio for January 2019 is 10.2%. By property type, the ratio is 6.8% for detached homes, 11.9% for townhouses, and 13.6% for condominiums.
In January 2019 the benchmark price for a detached in North Vancouver was $1,512,200 down 9.5% in one year, up 57.5% in 5 years and up 93.9% in 10 years.
In Richmond the detached benchmark price was $1,581,600 down 9.7% in one year, up 62.3% in 5 years and up 123.8% in 10 years.
In Vancouver East the detached benchmark price was $1,428,700 down 8.6% in one year, up 64.6% in 5 years and up 140.3% in 10 years.
In Vancouver West the detached benchmark price was $3,049,700 down 14.1% in one year, up 42.1% in 5 years and up 129.5% in 10 years.
In West Vancouver the detached benchmark price was $2,622,800 down 15.4% in one year, up 36.7% in 5 years and up 108.4% in 10 years.
Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of affordable inventory.
In January 2019 the benchmark price for a condo apartment in North Vancouver was $559,300 down 2.8% in one year, up 54.2% in 5 years and up 78.2% in 10 years.
In Richmond the condo benchmark price was $657,500 down 1.2% in one year, up 80.0% in 5 years and 106.5% in 10 years.
In Vancouver East the condo benchmark price was $530,500 down 3.9% in one year, up 72.0% in 5 years and up 101.2% in 10 years.
In Vancouver West the condo benchmark price was $783,400 down 3.6% in one year, up 62.1% in 5 years and up 95.8% in 10 years.
In West Vancouver the condo benchmark price was $1,108,800 down 6.0% in one year, up 63.6% in 5 years and up 84.1% in 10 years.