I hope you had a restful holiday and enjoyed some quality time with those closest to you. I love what I do and want to thank my clients for the trust they’ve placed in me – whether it’s in helping them find a new home or selling a property in our competitive and challenging market. As we swing into the new year, it’s a natural time to take stock of where the Vancouver market has been and where it’s headed.
2017 closed out in much the same way is it had developed through the spring and summer, with strong demand, low inventory and higher prices for condominium and townhouse properties, and lower demand, increased inventory and softening prices in the detached single-family market.
After reaching record levels in 2015 and 2016, Metro Vancouver home sales returned to more historically normal levels in 2017. Home listings, on the other hand, came in several thousand units below typical activity.
The Real Estate Board of Greater Vancouver reports that sales of detached, attached and apartment properties reached 35,993 on the Multiple Listing Service® (MLS®) in 2017, a 9.9 per cent decrease from the 39,943 sales recorded in 2016, and a 15 per cent decrease over the 42,326 residential sales in 2015.
Last year’s sales total was, however, 9.7 per cent above the 10-year sales average.
It was a steady year for home sales across the region, led by condominium and townhome activity, and a quieter year for home listings, Metro Vancouver home sales were the third highest we’ve seen in the past ten years while the home listings total was the second lowest on record for the same period.
Home listings in Metro Vancouver reached 54,655 in 2017. This is a 5.1 per cent decrease compared to the 57,596 homes listed in 2016 and a 4.5 per cent decrease compared to the 57,249 homes listed in 2015.
Last year’s listings total was 4.4 per cent below the 10-year listings average.
Market activity differed considerably this year based on property type. Competition was intense in the condominium and townhome markets, with multiple offer situations becoming commonplace. The detached home market operated in a more balanced state, giving home buyers more selection to choose from and more time to make decisions.
The MLS® HPI composite benchmark price for all residential properties in Metro Vancouver ends the year at $1,050,300. This is up 15.9 per cent compared to December 2016.
The benchmark price of condominiums increased 25.9 per cent in the region last year. Townhomes increased 18.5 per cent and detached homes increased 7.9 per cent.
It’s important to remember that these numbers are statistical averages based on thousands of sales in a broad region. The current value of your property will be depend on a number of factors including its age, condition, improvements and most importantly its location, size and the most recent sales of nearby properties like it.
By now you’ve likely received you 2018 Property Assessment Notice. This is an estimate for taxation purposes of your property’s value as of July 1st of last year. It won’t capture the value of any improvements you’ve made without a permit, or other special considerations, like above average landscaping, street appeal, etc. Be aware that it doesn’t reflect current market conditions, including the most recent sales in your neighbourhood. If you have any questions about your assessment notice or you’d like an estimate of your property’s present market value, please give me call.
Looking ahead, there are a number of factors that will have likely an impact on the 2018 market.
Effective January 1st, the federal government has tightened the mortgage qualifying rules. All mortgages, not just those that are insured, must be “stress tested” at rates either 2% higher than what a lender is offering, or at the Bank of Canada posted rates (currently 4.99% for a 5 year term). This will have impact on just how much buyers can borrow, effectively reducing the ceiling price on what they can pay for a new home. This will reduce the number of non-cash buyers for most properties, particularly those at lower price points (that have the highest appeal to first time buyers with the minimum down payment).
Most economists expect the Bank of Canada to raise prime rates by another 50 basis points over the next year which will increase both mortgage rates and monthly payments. This will impact what non-cash buyers can afford to purchase, also lowering their maximum price point.
Within the City of Vancouver, the Empty Homes Tax takes effect this year, imposing a property tax surcharge of 1% of the assessed value on owners that leave any home unoccupied for more than 6 months of the year. (Principal residences are exempt.) The intent of the policy is to encourage rentals and discourage “land banking”. I think this will lead to more listings as some local and foreign investors sell their places, rather than deal with a tenant.
Provincially, odds are on some measures in the NDP’s first budget (due next month) to discourage speculation. Legislation will likely be targeted at owners who are not BC residents and/or that do not pay a minimum threshold of income tax in Canada. Exactly how this mechanism will work remains to be seen, it could be a property tax surcharge similar to Vancouver’s Empty Home Tax. If enacted, I think this will lead to more listings as offshore owners sell their investment properties.
While the events above will likely increase supply and reduce demand, I don’t expect a sea-change in the market. Rather I expect the trends we’ve seen develop in 2017 to continue, but with lower year-over-year price increases and lower overall sales numbers. I expect to continue to see a tight market in attached (townhomes, duplexes) and condo housing at most price points, especially for resale homes that show well and are in desirable buildings and locations.
Any efficient tax on speculation by the province will likely affect the pre-sale and new condo market more significantly. The pre-sale market has been particularly strong, in large part because of the ability to leverage a 10-25% down payment and then either assign the contract, or complete and re-list the property. Given the 3-5 year timeline between the pre-sale contract being entered into and the building being completed, the recent year-over-year increase in values has been irresistible to speculators. Some developers have recently begun to price this future gain into pricing – the latest ultra high-end architectural towers downtown are selling at presale in the $3000/sqft range! It’s certainly conceivable to see a scenario where a new tax regime on non-resident buyers coupled with the city’s Empty Homes Tax leads to a flood of assignments and listings of units in new buildings.
I believe the detached market will likely continue to tilt in favour of buyers, especially for homes priced over $3M on the Westside and over $2M on the Eastside.
A new initiative by the City of Vancouver allows the owner of any pre 1940 house with character elements to redevelop the property with a modest increase in density over what is currently allowed, providing the house is retained and brought up to current code. A significant benefit is the ability to strata title the secondary suite(s) and/or an infill house, making any single family character home a potential development site. This will have appeal for a wide range of owners, including age-in-place boomers looking for rental income or cashing out some equity, multi-generational families, and small scale developers. One of the aims of this policy is to increase the number of housing options for both renters and buyers in historically single family neighbourhoods. Another is to increase the supply of family friendly housing throughout the city and reinvigorate neighbourhoods.
If you’re in the market for a brand new detached home on a full sized lot, I suspect that there will be deals to be had, but for everyone else assume that 2018 will bring the similar challenges to last year, with perhaps less competition and fewer multiple offers.
I believe we’ll continue to see a sellers' market but with more moderate increases in prices for condos and other attached homes, coupled with a balanced or even a buyers' market emerging for detached homes, especially at the mid to upper end of the market.
As in any market, there are opportunities, for both buyers and sellers.
For sellers, it’s important to be priced competitively and to have a professional high quality marketing plan to ensure that your property is a prospective buyer’s first choice. Having some flexibility in final terms and dates can be the key to a successful sale. As always, all real estate is local – the value of your property is specific to your neighbourhood, block, and improvements, and to the number of other similar properties competing for buyers’ attention. Call me for an up to date market evaluation and to find out how our proven marketing system can get you top dollar, quicker.
For buyers, having the very latest sales information to determine comparative value, and the ability to receive listings as soon as they are posted on the MLS system is key to getting the quality home you want. Pre-qualification for financing and the ability to fast track due diligence will make your offer more attractive. I’ll work with you to make sure you see the latest listings for properties that match your needs and budget. Once you decide on a place, I’ll guide you through the process and work with you to craft an offer that gives you the opportunity to secure it on your terms.
Give me a call to get started; I’d be pleased to help!