Is Vancouver’s Condo Market Bottoming?
August 29th, 2008 Categories: Real Estate News, Vancouver Real Estate
It’s no secret that Vancouver’s condo market prices have soften and overall the media news is negative but I have a different opinion based on my experiences in the market over the last two months, which have kept me hopping and left less time to blog!
Whilst housing sales have dropped, new construction picked up slightly in July, according to CMHC’s latest report. Starts in metropolitan Vancouver last month were up 24% above July 2007, boosting starts for the first 7 months of the year to a gain over same period last year. The largest gains were in Vancouver, Surrey and Delta. Are the developers turning positive again?
CMHC note that British Columbia is still experiencing population and job growth, though the economy has slowed a bit, and new home starts will move back to their long term average by 2009. A tight labour market and robust income growth will partially offset the dampening effect of rising mortgage carrying costs (though some analysts are anticipating the Bank of Canada to drop rates by year end) . They project 31,500 new housing starts in 2009, down from 39,195 in 2007.
CMHC also predict the average MLS price in B.C. will grow by 7.6% in 2008 and 3.5% in 2009. Are they right? Leave a comment.
From my perspective, I consider the Vancouver condo market during July and August to be a normal market. Having been a realtor since 1981 and ridden the Vancouver real estate roller coaster, I consider the current market to be a healthy one. With the exception of two new listings, I sold all my listings in the last two months, one even had multiple offers. They were in Kitsilano, Downtown , Coal Harbour and False Creek North, priced from $279,000 to $1,398,000.
In addition, there are many quality buyers now in the Vancouver condo market and more of them than there was in the spring. As well, the U.S. buyers are back and many of them are in the over $1 million market. I also receive many inquiries from buyers moving to Vancouver from Toronto. Actually, I am amazed at the inquiries I receive - from all over the world. There is no doubt in my mind that Vancouver is on the world map as far as a desirable place to live and invest. The buyers drive a hard bargain, as they should, and purchase with confidence, happy to have a good selection and cheaper prices.
No doubt the August stats will be worse than July but I believe the Fall market will be a good one for Vancouver condos. As i follow the monthly stats I am noticing Kitsilano and the West End are showing signs of bottoming. Coal Harbour and Downtown remain well supplied (many investors taking some profits).
Do you think the Fall market will mark a turnaround for Vancouver condos or will prices soften another 5%?
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“I sold all my listings in the last two months, one even had multiple offers.”
Good for you. You are in a small minority of Realtors that have. July and August almost always have stronger sales than the subsequent September and October. Maybe this year is different.
Comment by jesse — August 29, 2008 #
Hi Maggie. Thanks for your insight. So do you really see things going up again? I have been waiting to buy for six months or so as a work colleague told me prices would go down, but they have not yet. I some money saved up for a down payment, and really want to get in the market if it is going up again, as I am worried that this will be my last chance to buy in Vancouver!!!!
Any advise would be appreciated.
Comment by Gah — August 29, 2008 #
Only time will tell, but it’s pretty clear that the CMHC number, which I believe is from the beginning of the calendar year, has pretty much no chance of being even close to an accurate prediction at this point. We’ll probably be DOWN at least 7.6% year over year (I would predict double or even triple that) by the end of 2008.
Everything I am seeing points to a significant downturn, if not complete crash, in Vancouver real estate over the next couple of years.
Comment by Chris Ryan — August 29, 2008 #
Hello,
Do you think the Fall market will mark a turnaround for Vancouver condos or will prices soften another 5%?
I am sure for a trunaround, as I wish to sell my house and buyers willcome in Spetember. August is vacation time.
Comment by tira — August 30, 2008 #
Hmmmm…good insite on the current market and a very interesting question at the end. Will the market go up or down? I don’t have a crystal ball nor do I pretend to know it all. But prices the way they are, are against fundimentals. It isn’t a healthy market when the average family cannot afford the average house.
I don’t know if the market will soften, but I hope it does. My family needs a home, and quiet frankly, it hurts to raise a family in a highrise rental situation.
~Sarah
Comment by sarah from Richmond — August 30, 2008 #
Interesting points mentioned in the post. It still seems to me though, from my very anecdotal and humble perspective, that most people are very ready to sit and wait a while to see just what will happen in the next year at least. I for one will wait to see prices actually start rising again before I consider buying anything before 2010.
Comment by N2V — August 30, 2008 #
I’m with you 100%, Maggie. I have lived all over the world and Vanocuver’s waterfront options are second to none. Our unique urban setting is like a bulletproof shroud against the vicissitudes of RE valuation, and I, for one, am heavily invested here.
Still looking for more, too, so we should talk!
Comment by Jay — August 30, 2008 #
Hi Maggie; Interesting question. My opinion for what it’s worth is that prices will decline in excess of 10 % this fall followed by a greater drop each year for the next two. I expect to see 40% drop by the summer of 2011 as we seem to be following the US housing bust to a tee with a 2 year delay! (Typical we were two years behind them going up, don’t you agree?). Make sure you warn FTHB that now is a terrrible time to buy! I know your priorities are happy clients and it would be a shame if other realitors did not follow your advice to wait out the down turn!
Thanks!
Comment by Strataman — August 30, 2008 #
I enjoy reading your perspectives. Thanks. As for your question, I am not sure CMHC is right, but I do think 08 and 09 will be mid single digit positive.
Comment by samantha — August 30, 2008 #
I think this is as low as the prices will get. People who are waiting to buy will be in for a surprise. The dip here was due to many people going on vacation. Once September rolls around, get ready for a rally.
Comment by Eric — August 30, 2008 #
“CMHC also predict the average MLS price in B.C. will grow by 7.6% in 2008 and 3.5% in 2009.”
Seems unlikely as we are currently at -0.4 percent year over year growth in BC, and -4.0% growth for the lower mainland.
You’re asking for a prediction, I predict that by the time the end of the rolls around we’ll be at -8% growth for the lower mainland. Different areas will be declining at different rates, but overall there will be a general decline.
Comment by Slanty2D — August 31, 2008 #
one must not let negative sentiment overwhelm rational thought…..
while the market may currently be slightly off from the recent past it will come back..
buyer demand will return probably sooner than later so some patience is required
i’ve seen some excellent deals out there so it is not all doom and gloom
increased affordability is a good thing
(t.i.c.)
Comment by blueskies — September 1, 2008 #
Very interesting comments. I am watching very carefully, as my wife and I have been saving for quite sometime and have managed to save up a massive down payment. We were getting ourselves prepared to jump into this crazy market this fall, but judging by all the press I have been reading, now is definitely not a prime time to buy. Looking at consumer sentiment and huge glut of inventory, I would say we should expect to see AT LEAST a %5 drop in condo prices by this fall, as well as further price reductions for at least the next year or more. By the time the dust settles, I would expect to see about a %30 - %40 discount on current condo prices. THEN I will jump into a more realistic market.
Ceers!
Comment by Greely — September 1, 2008 #
Its so hard to predict what will happen. All we can do is look at inventory and sales. Inventory is up and sales are down which means that huge run up we have had is over. I think we need to watch the numbers and be cautious as to not overspend. Remember that we have had peaks and dips. Obviously this is a peak.
Comment by househunter — September 3, 2008 #
I believe the Vancouver real estate market is not a hard one to predict from this point. Yes, Vancouver is a desirable place and there will always be high end buyers coming here. But the percentage of demand in the market that the high end buyer represents will not substane what has happened since 2001.
There are six things wrong with our current market. And three possible and likely things that could happen with in the next three years.
First; We had seen, until the recent present over a 100% increase in every type of real estate(residental). If you look at the charts from say 1975-present; everytime the market reached for gains over 100%; the market then gave back 25-45% of those gains depending on how quickely they were achieved.
Second, we have a very big problem in the Vancouver real estate market. PRE-BUILDs are going to dramatically effect the over supply of residental property. We already have a large decrease in demand for residental real estate and yet the number of units on the market(supply) keeps increasing every month. Now if i were a developer that is seeing an over supply on the market causing downward presure on prices; i would think twice about starting a two year project right now. Yet every where you go in Vancouver you see cranes at work. The developer doesnt’ care if the price of the condo’s they build is less in the two years it takes to build because they presold it to speculators and have already made their money. So even though demand seems to be more and more absent; new projects are still be approved and ground is still being broken everywhere you turn. This is going to cause construction to continue atleast a year or two passed when the market is telling it to stop(based on price and demand).
Third, when coal harbor(for example) went up in and around 2001-2004; there was a large USA demand for those condo’s when the exchange rate was 1.5CAD to 1.0USD. Now if i’m a US buyer or a US owner of CAD property; which has seen a 100% increase on my property value and given the dollars being on par will also see a 50% increase by converting my money back to USD. The smart american is not coming here; and if they are here they are selling and running back to the USA with probably 150% + gain on a few years investment. Not Bad! Not to mention the bargain basement prices real estate has become south of the 49th parallel.
Fourth but not least, the boom has been over fueled by olympic speculation. Its two weeks people. Here and gone before you can say ‘where did all my house equity go?’
Fifth, if you have been paying attention to the stock market and the USA financial crisis; you must be realizing that credit for morgages is tightening. Not to mention the world is now speeding towards a recession. At least the construction industry isn’t feeling it, LOL.
Sixth, credit tightening with Oct 2nd bringing the outlawing of the 40 year morgage which came to life because people couldn’t afford housing prices at the current 25 year rate.
Possible things that can happen in the recent future.
First, this is more forward looking then anything. When the construction finally does stop in vancouver; what is going to happen to all the construction workers that no longer have jobs but they do have morgages?
Second, (more forward looking statements) the speculators that get stuck with a condo they planned to flip but can’t because of current market price.
Third, we are in recession; people are losing jobs and defaulting on morgages. The economic cycle.
ALL of these things are happening or most likely going to happen to some extent in the close future. This is why demand is going down and will continued to be forced down. Over supply is going to be exagerated to point it has never seen in the past. And prices will decrease but by how much. . .
A good tip for future buyers. When you see real estate inventorys(supply) dipping; price increases aren’t far behind and that is when it is time to buy. When inventorys are rising; price decreases are coming and that is the best time to exit the market as quickly as possible(if it is an investment property).
Comment by T. — September 20, 2008 #