If You Don’t Buy Now, You’ll Hate Yourself Later
March 20th, 2008 Categories: Real Estate News, Vancouver Real Estate
Vancouver’s market has falling interest rates, economic growth and job creation.
Robyn Adamache at CMHC says we have no real estate bubble in Vancouver. The following is a summary of her presentation that I just attended, courtesy of RBC.
Interest rates will be falling slightly in ‘08 and rise slightly(up to 0 .75%) in ‘09, remaining flat to 2012-13. B.C.’s economy remains strong with 3% economic growth - same as last year - which is above the Canadian average and will fall slightly in ‘08. Our economy created 30,000 new jobs last year and has 4% unemployment.
30,000 people moved to the Vancouver last year and 60,000 to B.C. Main International immigration comes from China, India, Taiwan and U.S.A. The 55-75 age group will grow the most over the next 4 years and this group starts to downsize at 55. Move-up buyers are the largest group in the market at present.
Property sales will start levelling off at the current high level, bringing a more balanced market. 40% of sales in Greater Vancouver are condos, up from 15% in 1994.
In the early ’80s, 60% of condos were resold in 1 year, in the early ’90s it was 35%. In 2002 it was 25% and the rate is trending now. 25% of assignments get flipped - this stat is not included in the above. In Downtown, 50% of the condos are bought by investors. Vacancy rate on West Side is now 0.3% and projected to remain there going forward.
After 2010 new transportation projects will keep the economy moving. 2010 will add $4.9 billion to the economy from 2001-2016 and the economy will grow til 2016 then return to normal. Consumer confidence peaked in 2006. Lumber demand is down.
Average sales price in Coal Harbour and False Creek North is double that of Downtown and West End. Sales to Listings Ratio now at 70%, no downturn projected. Above 60% is a seller’s market, below 45% is a buyer’s market.
Projected increase in prices for 2008 is 8%, in 2009 it is 5% in Metro Vancouver. Properties are selling at 98% of List Price. 2010 will add a 1% growth in prices per year til 2020.
Downtown had 1882 new starts in 2007, reaching built out stage. East Side will be next to grow with new projects. The market absorbs about 650-700 new starts per month. No oversupply in new product.
Sub-prime loans - Canada runs about 2% vs. US which runs about 10%. Canada has a lower default rate and no adjustable rate mortgages, resulting in a different “culture of debt” as Canadian mortgage payments are not tax deductible.
Conclusion: In B.C. we have a strong local economy and good job growth, coupled with strong market fundamentals and sustainability, which result in no real estate bubble.
radamache@cmhc.ca or 604-737-4144
3 Comments »
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Hey CMHC economist.
How do you figure we can have the highest real estate prices on the continent; with meager incomes and not have a debt problem and subprime.
Do you really believe that your organizations epic irresponsible policies of 5% down and 44% of income with 40 year ams is not subprime?????
And is speculative demand really a fundamental in your world?? What are you credentials? You are writing stories with the potential to spur people to do really stupid things. Please state for the record what you believe fundamentals are for a long term property market!!!
Comment by Joel — March 24, 2008 #
In Downtown, 50% of the condos are bought by investors. Vacancy rate on West Side is now 0.3% and projected to remain there going forward.
Those vacancy stats don’t include the condos bought by investors, only professionally managed rental units. Looking at the number of rental listings downtown our vacancy rate is a LOT higher than 0.3%
Comment by Dave Leah — March 26, 2008 #
I am unsure about your math:
strong local economy + good job growth + market fundamentals + sustainability = no real estate bubble
I understand that if you work in the Business of Real Estate it is in your best interest to keep the positives in the fore-front. However, in the last 20 years - our economic dependencies are no longer local. Like a Biological Web, we are attached/connected to more than whats in front of us. The spokes of our web touches all economies everywhere.
So instead of painting a rosy picture without having a full understanding of ‘the real world’ - it may have better served you to - be more realistic in your opinion piece.
Comment by s.p. — July 18, 2008 #