To say that 2016 was an eventful year for our Greater Vancouver real estate market would be an understatement. The first half of the year saw double-digit price increases for all housing types, fueled by higher local and foreign demand coupled with an ongoing low supply of listings. By mid-spring, the big story was the jump in attached strata prices. After years of lagging behind the detached market, the condo market caught fire as first-time and move-up buyers competed with downsizers and investors for a limited supply of quality listings. By early spring, prices for condos in Vancouver were up 30% year over year, while detached homes were up approx. 35%.
This was in spite of changes to the BC Property Transfer Tax (PTT) in the February budget that created a third tier - with a 1% surcharge on the balance of a property’s purchase price above $2 million. And regardless of warnings issued by both the Bank of Canada and the Federal Finance Minister that the Vancouver market was overheated.
In early summer, just as sales were slowing and the market finally seemed to be leveling off, the provincial government announced a surprise 15% surcharge on the PTT for non-residents, effective just two weeks later on August 2nd. The market changed overnight - with sales dropping off in August and continuing to languish throughout the fall amid uncertainty about future value and appropriate pricing.
In October, the Federal Finance Minister announced onerous new stress-testing for insured mortgages, requiring borrowers to qualify at a much higher “published” mortgage rate. This has made it more difficult for first-time buyers and millennials to get into the market and curbed demand at the lower end.
In December, with a provincial election looming in the spring, the BC Liberals announced a 5 year interest free loan for up to 5% of the purchase price for first-time buyers to mixed reviews.
2016 also saw the imposition of a vacant home property tax surcharge by the City of Vancouver, legislative changes affecting the ability of buyers to assign contracts, and a complete restructuring of the organization responsible for overseeing the industry. And, of course, the surprising results of the US election - resulting in renewed interest in our market from disaffected Americans as well as upward pressure on US interest rates.
Most recently, the Chinese government has started enforcing stricter controls on capital leaving the country, effecting the ability of buyers with Chinese equity to buy foreign property (assuming they can work around or stomach the 15% Property Transfer Tax surcharge).
At the beginning of 2017 we’re in a continued period of uncertainty, with sales down about 50% year over year, but listings also down as well. In many categories and neighbourhoods there is a lack of quality properties for buyers to choose from. So far, most sellers have been reluctant to accept significant discounts from the highs of last spring, although reductions in the 5-10% range have been seen in the limited number of sales since August. As might be expected, the higher end of the market has seen the most impact to date, with some building lots and spec houses trading at up to 15% less than we saw at the height of the market last spring. By the end of the year, median prices were still up by about 20% from where they started last January.
Time will tell what the 2017 spring market will bring. A surge in new listings coupled with ongoing lower sales numbers may be the tipping point to bring about a true market correction. Industry professionals and economists are offering a range of guidance in the upcoming year, from a “steady as she goes” outlook with leveling prices amongst reduced demand, to a more dour outlook with up to a further 10% reduction in prices. From my point of view, one truism of the Vancouver market is that it has always been challenging to find a great property that meets your needs - at a price that you can afford. And when one does come to market, it often sells quickly and sometimes with multiple offers.
So, as in any market, there are opportunities, for both buyers and sellers.
For sellers, it is now more 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!
As always, my very best to you and your family in the upcoming year!