A Review of Fall Vancouver Real Estate Activity

October 2017 saw interesting activity in the Vancouver market that may be the repercussion of the federal government announcement to tighten mortgage requirements sending motivated buyers scrambling to enter the market before changes commence January 1st, 2018.

WHAT IS A MORTGAGE STRESS TEST?

Currently, a buyer becomes an uninsured borrower when they put down more than 20% of a home’s value and thus don’t have to pay for mortgage insurance. Only insured borrowers, those who put down less than 20%, are required to undergo a stress test of their finances. The test ensures the borrower can pay back the loan if interest rates become higher than they are today. Managing personal debt and maintaining the integrity of the banking system are the motivating factors for the new rules. The measures require lenders to test a borrower’s ability to pay at the greater of the Bank of Canada’s five-year benchmark rate or 2 percentage points higher than the offered mortgage rate.

Could this be why we’ve seen residential property sales in Greater Vancouver total 3022 this last month, a 35.3% increase from October 2016 and an increase of 7.1% over September 2017? What the market does in the new year will shed a little more light on this.

According to the Housing Affordability Monitor published by the National Bank of Canada, rising interest joined with substantial barriers to qualify for uninsured loans will leave markets ripe for falling home prices. However, the President of the Canadian Mortgage Broker’s Association states that [the mortgage] “changes may erode confidence in the market and real estate values because homebuyers with large down payments will have a more difficult time finding mortgage financing”. He believes the first half of 2018 may see that effect but the second half will be the true evaluation with potential stabilization given the constant demand for product in Vancouver’s market. [Source: https://www.biv.com/article/2017/11/housing-prices-expected-cool-next-year-report/]

VANCOUVER WEST AND EAST SALES

Vancouver East in particular saw a leap in apartment sales from September (129) to October (150) as buyers look to get in. Remarkably, both Vancouver West and East detached homes saw a big leap in sales as well with the west’s sales jumping from 73 to 108 sold.

In a year’s overview, from October 2016 to October 2017, Vancouver West saw detached home sales jump from 78 to 108, townhomes from 30 to 54 and apartments 299 to 392. Vancouver East saw detached home sales go from 50 to 65, townhomes from 28 to 40 and apartments 109 to 150.

VANCOUVER WEST NOVEMBER 14, 2017 ANALYSIS

A frequent measure of the strength of a real estate market is the ratio of sales to active listings. If there is more than a 6 month inventory, it is considered a buyer’s market and in the event there is 3 months or less of inventory, it is a seller’s market. Currently assuming constant sales, there will be 68 detached houses sold this month with 779 listings, thus an 11 month inventory—clearly a buyer’s market. Incredibly, there is a paltry 2.15 month supply of apartments on the market. This certainly explains why apartments are considered “hot”.

VANCOUVER EAST NOVEMBER 14, 2017 ANALYSIS

Currently, there are 762 homes for sale on the Eastside and I am projecting 92 sales. This indicates an 8.28 month supply of homes on the market. Conversely, there is a paltry 202 apartments for sale indicating a 1.32 month supply. This explains why Eastside apartments are generating multiple bids. Of note is that the average sale price of a condo is now $603,258 versus $542,094 last year, an increase of 11%.

*Charts courtesy of the REBGV

SUMMARY AND FURTHER READING

Going into the Christmas and New Years seasons are typically slow but current factors seem to have generated unusual short-term momentum. Never a dull moment in this market!

For an overview of the market in general, please visit the Real Estate Board’s October market report.

*Statistics from The Real Estate Board of Greater Vancouver and MLS®
*You should always obtain proper professional advice if you are considering purchasing or selling residential real estate in Vancouver. The opinions expressed on my blog are entirely my own. You assume full responsibility for the use of information provided here. The information presented is subject to change and may not always be accurate due to changing market conditions. The information should not be relied upon as legal or financial advice. I disclaim liability for any damages or losses, direct or indirect, that may result from use of or reliance on information contained in the blog.