Vancouver Real Estate Bubble – Prices and Taxes

Jamie discusses the Real Estate patterns and trends for October 2018 and what we may expect as we look to the market in 2019. Learn from one of the top Vancouver Realtors.

 Vancouver  Real Estate Market Statistics and Prices

Below is a Transcription of the above Video

In October we saw the continuing pattern we have seen in the past 6 months in the GVRB Market. Markets are continuing to soften price wise, they are not by any means tanking, but prices are starting to come down slightly each month. October sales, for the entire lower mainland, were 26.8% below the 10-year average. One thing you have to remember about that 10-year average is that the 10-year average is pretty high, the markets have been quite busy during that time. So, how I read this, is that it is 26.8% below a really busy market.

The supply of homes today is the highest it has been in 4 years.

What that does, is that it takes the pressure off of the buyers. Going back a couple of years when people walked into a property and wanted to purchase it, you pretty much had to make your decision within 24-48 hours, if you were lucky.

There are certain parts of the market however that is still pretty active.

The downtown condo market up to $700,000 is still busy, you will still find in certain instances, multiple offer situations on those with some even selling above asking.

The Westside Detached market has something really unusual that has happened in the month of October. For the last 2 months, there have been 47 sales above 3 million dollars. That part of the market has been pretty much non-existent on the westside for at least 12-18 months. The only thing I can think of to explain that is is that maybe the properties that were 4 million dollars plus have now slid back down to the 3 million dollar range.

The buyers that have been standing and waiting for the market to soften are now prepared to re-enter the market. What was interesting of these 47 sales, is that when I pulled up the first 10 of them (all sold between 3 and 3.8 million dollars), these homes all sold for an average of $620,000 below the assessed value. Now how would that be? Well, these assessments were done in July of 2017, the ones that were distributed in January of 2018. So that is already 16-month-old information from when the city assessed them. I found that pretty interesting, to see the high side of the market, that is about 15-18% below the assessed values that they were selling for on average.

The Eastside Market for detached houses is still pretty good – up to about 1.75%. It still remains right on the border of a balanced market and a seller’s market at about a 20% list to sell ratio. But once you get above 1.75 million it’s a 4% list to sell ratio on the Eastside. The entire Eastside condo and townhouse market remain pretty strong.

The Richmond condo market stays pretty strong up to about $700,000 and if you are looking for a detached house in Ladner the market is reasonably active up to about 1 million dollars and slows down after you have passed that point.

So what is causing all of this?

These are the questions I get asked a lot. The foreign buyer’s tax that was implemented in August of 2016 has gone from 15% to now 20%. So when you think about that, for 20% when you have to pay that on top of buying a million dollar home, that is a $200,000 tax (on just a million dollar home), that you are going to kiss goodbye and never see again. People like to say “Oh, people are rich, they can afford that”. Well, I like to say, how do you think they can afford it in the first place? If there are other options to paying a $200,000 tax, such as investing in different cities, investing in different things, I am sure they are going to explore other options.

Let’s talk about what rising interest rates and the stress tests have done to peoples borrowing power. Since the summer of 2017, we have had 5 interest rate hikes going from 2.79 to 3.84%. For those who do not know what the stress test is, you actually have to qualify at 2% higher rate, making you have to qualify at 5.84%. To give you an idea of what that means, before the interest rate hike and stress test, if you had a family income of $100,000 in June of 2017 (before the stress test came into play) and you put 20% (which would be $180,000) you could purchase a $900,000 property. 16 months later, with only 20% down, you can only get a purchase price of $650,000 and a $520,000 mortgage.

That is a big difference and the accumulation of all these things is what slows the market down.

We also have increased property transfer tax as well that applies to everybody. The property transfer tax, for years, was 1% of the first $100,000 and 2% of the balance. That’s all changed now over the last couple years and is now 1% of the first $200,000, 2% between $200,000 and 2 million, 3% between 2 and 3 million, and if you go above 3 million its another 2% on top of that. The combination of all of these taxes is obviously another reason for slowing the market down. Another thing that really fascinates me is that the NDP government’s projection about their revenues from the property transfer tax. I read somewhere that they are projecting about a 30-40% shortfall in their revenues from the property transfer tax, which blows my mind.

They raise all of these taxes, and their budget was a 2% or 3% increase, to slow the market down – and then are surprised they have a 30-40% shortfall! That is going to be coming out of our pocket somewhere else.

We also have speculation taxes and empty household taxes. Combining all of this with people with massive household debt, the highest its ever been in Canada, auto sales are down, retail sales are down, it doesn’t make the outlook look very rosy for the immediate future real estate wise. People ask me what my projections are for the new year? I don’t know, but here is what I do know for sure.

In my life, the NDP has been in power 3 times, and all 3 times the real estate market has suffered. Call it coincidence, call it their policies I don’t know. It happened in 72-75, after that we saw the late 70’s boom. Then in the 90’s when we had the NDP government in again, the rest of North America, the US, and Canada were booming, but not BC. We were dead until 2001. What happened in 2001? The liberals came into power and honestly the very next day my phone started ringing as I’ve never heard my phone ring since I’ve been in real estate.

Later that year the Sept 11th catastrophe happened, and that had a big impact on our Market. Sept 11th was on a Tuesday and the American’s shut the Dow Jones down until the following Monday because they were worried the stock market was going to collapse. What they did to offset that, is they dropped interest rates a full percent before they re-opened it, and the Canadians followed.

Then within the next month, the Canadians and the Americans both dropped their rates another 1%. So then all of a sudden you could own a house on the westside for the low 300’s in those days. It was cheaper to own a house instead of renting it during that time, and that is what made our markets just skyrocket to where we are today, with a couple of blips with the 2008 US banking crises etc.

Hopefully this has given you a little insight on what’s happened with the market!

Buying or Selling a home in the Greater Vancouver Area contact Jamie Hooper and his team at https://jamiehooper.com | Vancouver Real Estate