by James Schouw BIV, December 14, 2009. James Schouw is the owner of James Schouw and Associates Inc. and is a former BIV Forty under 40 award winner
A year ago Vancouver was hit by the global economic and credit tsunamis and the 7 year real estate boom was declared dead. Sales were sluggish and may expected recovery to be slow and painful.
REBGV reports that sales year over year to October 2009 increased 171.6%, representing 171.6% of October 2008′s tally.
What happened and what’s next?
To answer, it’s important to recognize some often misunderstood dynamics driving our real estate market. A common characterization is that homes listed for resale represent inventory. That’s a hazardous oversimplification because it doesn’t take into account that each prospective seller is also typically a prospective buyer. A thousand homes can change hands, keeping Realtors and movers busy without adding or subtracting a single home from inventory. Some homeowners may choose to become tenants, but each such case creates a market for one more landlord-owned home. Inventory remains fundamentally unchanged.
Greater Vancouver’s effective inventory, the number of vacant homes seeking residents, probably peaked in mid 2008. Some developers were sitting on hundreds of lonely units. Then the economic skied blackened.
Developers and their lenders slowed new residential development to a trickle, choking new supply. But demand didn’t subside. Contrary to some conventional wisdom, an individual or family doesn’t have to be excited about the economy or the Olympic Games to participate in the housing market. They just have to be breathing. During the 15 months to July 1, 2009 BC’s population grew by 92,595, a typical rate, requiring about 40,000 additional homes. But the development industry fell far short and continues to fall short, ausing inventory to shrink fast. New housing starts will eventually ramp up again, but completions will lag by many months, and a restored healthy inventory is years away.
Where does that leave us?
As the months roll into 2010 Metro Vancouver’s growing populaton will continue to absorb about 300 additional units of housing every week. Shrinking inventory will make real estate harder to buy, with excess demand from the tightest localized markets overflowing into others. An increasing number of prospective sellers may get cold feed for fear of getting left out of the market, further reducing the flow of resale listings and sales volume. Prices will rise.
Metro Vancouver’s real estate market is not a bubble. It will only become so if zealous developers oversupply our growing market.
As the city comes of age, increasingly desirable to many prospective Vancouverites, some residents will continue to discover that home ownership, or by extension, rental, becomes increasingly unaffordable.
And the Olympic Games?
We’ve already enjoyed the stimulus afforded by years of related infrastructure, and we may experience an incremental long-term increase in demand. In the meantime, though, most buyers are buying simply because they need a home – and will continue to do so.
Agree with the above? Have a comment?
when you’re ready to buy or sell vancouver real estate, contact Maggie, an experienced realtor marketing Vancouver homes since 1981
subscribe via RSS or email
You must log in to post a comment.