Blog › March 2015

All Signs Point to Continued Rise of Local House Prices


Economic growth predictions, population increase projections and ever-rising tide of foreign investors set to keep driving prices up

House prices rising

 "So will Vancouver and Lower Mainland real estate prices just keep rising – or are we in a bubble that is set to pop?"

Well, nobody can predict the future with 100 per cent certainty. But all the indicators suggest that this is not a bubble and that house prices will just keep rising – for the foreseeable future, at least.

What makes me say that? Five key factors.

1) Extremely Tight Local Housing Inventory

The British Columbia Real Estate Association says that, for the Greater Vancouver market, a sales-to-active listings ratio anywhere above 22 per cent is a sellers’ market. In January 2015 we saw a ratio of 17.7 per cent, but the following month, it jumped to 25.7 per cent. Advantage sellers.

What this means is that February saw a big jump in bidding wars and homes selling above asking price. With sales set only to increase, this will doubtless be the case for the rest of this spring market, if not the whole year.

2) Historic Low Interest Rates

With mortgage lenders offering rates that currently seem to be going from rock bottom to even lower, local buyers are suddenly able to afford that little bit more than previously – and listing agents know this and price accordingly. And they can afford to do so. With the previously mentioned inventory as tight as it is, they’re not going to scare away buyers by pushing up asking prices.

So for the short term at least, until interest rates start rising again, this will be a major factor in driving up local residential property prices.

3) Local Economic Growth Projections

New projections from the Conference Board of Canada say that Greater Vancouver’s economic growth in 2016, 2017 and 2018 will be at least 3 per cent each year, outstripping the 27 other census metropolitan areas (CMAs) surveyed across Canada.

The board said in a report published in March 5: “Vancouver’s economic outlook is positive.”

It added that the Vancouver CMA unemployment rate (currently 5.8 per cent) will fall to 4.7 per cent by 2019, similar to that of Calgary at the height of its economic boom.

Other institutions agree. RBC is similarly bullish about the economic growth in BC as a whole, as reported by Business in Vancouver.

With the economy of other provinces and CMAs like Calgary projected to grow at a much slower rate, BC generally and Vancouver specifically are set to benefit with a boost in business activity, greater investment in the city and (hopefully) an increase in average incomes. All of which naturally boosts real estate prices in the medium to long term.

4) Local Population Increase Forecasts

Metro Vancouver’s population is forecast to grow by 30,000 new residents each year, or 1.2 million residents, by 2041 for a total population of 3.4 million, according to Metro Vancouver’s Metro 2040  regional growth projections 

That’s half a million new homes needed in the area to house all those people – and yet housing starts at least over the next few years, are predicted to remain relatively flat, according to the CMHC

What’s more, Metro 2040 was compiled before the recent dip in oil prices and contraction in growth of our neighbouring oil-rich provinces. Interprovincial migration from BC to Alberta is now dropping rapidly. We’re getting more and more people, and losing fewer and fewer. So by 2019, the 30,000-a-year population growth that Vancouver has been seeing could increase to 42,000 additional people a year, said the conference board.

This kind of population growth will put huge pressure on local housing stock and, again, keep house prices rising.

5) Continued Influx of Overseas Investors

One of the most discussed (and much-maligned) influences on Vancouver real estate prices is the thorny topic of overseas investors parking their money in our city’s more expensive homes, particularly those from mainland China.

Some BC agents have suggested the trend is focusing increasingly towards investing commercial and recreational (hotel/resort) properties and away from the limitations of Vancouver housing. And that may be true, but it doesn’t mean that foreign investors are going to stop buying up the city’s real estate and pushing up prices. If anything, signs suggest that more and more overseas investors, from an increasing number of countries, will look to perceived “safe havens” such as Vancouver to park their cash.

The Urban Land Institute said in a recent report that “Local money coming out of China and South Korea is set to continue to seek a home in international markets, and to be supplemented in the years to come by pension fund capital from Japan.”

And Canadian Real Estate Wealth recently reported that Canadian real estate markets should prepare for an influx of investors from Russia and Greece too.

The article said, "Dr. Sherry Cooper, chief economist at Dominion Lending Centres, told CREW sister site MortgageBrokerNews.ca that, due to political uncertainty in Russia and Greece, nationals from both of those countries are expected to move their money out-of-country and into the Canadian real estate market."

So it looks like we are not expecting foreign investment to die down any time soon – even if the Chinese economy’s growth doesn't perform as well as anticipated.

Where does all this leave the average Vancouverite? Sitting pretty, if you're a home owner. Positively smug, if you’re a real estate investor. And if you’re a renter – with a limited window of opportunity to get yourself onto the property ladder any way you can while rates are low.

- See more at: http://www.rew.ca/news/editorial-all-signs-point-to-continued-rise-of-local-house-prices-1.1798709#sthash.BvdCFmtX.dpuf



All Signs Point to Continued Rise of Local House Prices


Economic growth predictions, population increase projections and ever-rising tide of foreign investors set to keep driving prices up

House prices rising

So will Vancouver and Lower Mainland real estate prices just keep rising – or are we in a bubble that is set to pop?

Well, nobody can predict the future with 100 per cent certainty. But all the indicators suggest that this is not a bubble and that house prices will just keep rising – for the foreseeable future, at least.

What makes me say that? Five key factors.

1) Extremely Tight Local Housing Inventory

The British Columbia Real Estate Association says that, for the Greater Vancouver market, a sales-to-active listings ratio anywhere above 22 per cent is a sellers’ market. In January 2015 we saw a ratio of 17.7 per cent, but the following month, it jumped to 25.7 per cent. Advantage sellers.

What this means is that February saw a big jump in bidding wars and homes selling above asking price. With sales set only to increase, this will doubtless be the case for the rest of this spring market, if not the whole year.

2) Historic Low Interest Rates

With mortgage lenders offering rates that currently seem to be going from rock bottom to even lower, local buyers are suddenly able to afford that little bit more than previously – and listing agents know this and price accordingly. And they can afford to do so. With the previously mentioned inventory as tight as it is, they’re not going to scare away buyers by pushing up asking prices.

So for the short term at least, until interest rates start rising again, this will be a major factor in driving up local residential property prices.

3) Local Economic Growth Projections

New projections from the Conference Board of Canada say that Greater Vancouver’s economic growth in 2016, 2017 and 2018 will be at least 3 per cent each year, outstripping the 27 other census metropolitan areas (CMAs) surveyed across Canada.

The board said in a report published in March 5: “Vancouver’s economic outlook is positive.”

It added that the Vancouver CMA unemployment rate (currently 5.8 per cent) will fall to 4.7 per cent by 2019, similar to that of Calgary at the height of its economic boom.

Other institutions agree. RBC is similarly bullish about the economic growth in BC as a whole, as reported by REW.ca’s sister publication Business in Vancouver.

With the economy of other provinces and CMAs like Calgary projected to grow at a much slower rate, BC generally and Vancouver specifically are set to benefit with a boost in business activity, greater investment in the city and (hopefully) an increase in average incomes. All of which naturally boosts real estate prices in the medium to long term.

4) Local Population Increase Forecasts

Metro Vancouver’s population is forecast to grow by 30,000 new residents each year, or 1.2 million residents, by 2041 for a total population of 3.4 million, according to Metro Vancouver’s Metro 2040  regional growth projections 

That’s half a million new homes needed in the area to house all those people – and yet housing starts at least over the next few years, are predicted to remain relatively flat, according to the CMHC

What’s more, Metro 2040 was compiled before the recent dip in oil prices and contraction in growth of our neighbouring oil-rich provinces. Interprovincial migration from BC to Alberta is now dropping rapidly. We’re getting more and more people, and losing fewer and fewer. So by 2019, the 30,000-a-year population growth that Vancouver has been seeing could increase to 42,000 additional people a year, said the conference board.

This kind of population growth will put huge pressure on local housing stock and, again, keep house prices rising.

5) Continued Influx of Overseas Investors

One of the most discussed (and much-maligned) influences on Vancouver real estate prices is the thorny topic of overseas investors parking their money in our city’s more expensive homes, particularly those from mainland China.

Some BC agents have suggested the trend is focusing increasingly towards investing commercial and recreational (hotel/resort) properties and away from the limitations of Vancouver housing. And that may be true, but it doesn’t mean that foreign investors are going to stop buying up the city’s real estate and pushing up prices. If anything, signs suggest that more and more overseas investors, from an increasing number of countries, will look to perceived “safe havens” such as Vancouver to park their cash.

The Urban Land Institute said in a recent report that “Local money coming out of China and South Korea is set to continue to seek a home in international markets, and to be supplemented in the years to come by pension fund capital from Japan.”

And Canadian Real Estate Wealth recently reported that Canadian real estate markets should prepare for an influx of investors from Russia and Greece too.

The article said, "Dr. Sherry Cooper, chief economist at Dominion Lending Centres, told CREW sister site MortgageBrokerNews.ca that, due to political uncertainty in Russia and Greece, nationals from both of those countries are expected to move their money out-of-country and into the Canadian real estate market."

So it looks like we are not expecting foreign investment to die down any time soon – even if the Chinese economy’s growth doesn't perform as well as anticipated.

Where does all this leave the average Vancouverite? Sitting pretty, if you're a home owner. Positively smug, if you’re a real estate investor. And if you’re a renter – with a limited window of opportunity to get yourself onto the property ladder any way you can while rates are low.



Recently Sold Listing 102 - 7800 St. Albans Road, Richmond, British Columbia


V1099390 - 102 - 7800 St. Albans Road, Richmond, British Columbia, CANADAI have just recently sold this listing at 102 - 7800 St. Albans Road, Richmond.

Wealth Transfer Driving Vancouver House Prices (Not Just Overseas Buyers)


The transfer of wealth between generations is an increasing factor in local real-estate transactions – whether that family is Canadian, Chinese or otherwise

Multi-generational family celebrating

In the past couple of weeks we’ve seen how Greater Vancouver’s house prices are on a seemingly unstoppable upward trajectory, with the real estate board reporting that February benchmark prices are up 6.4 per cent year over year for homes sold on the MLS, and sales up 21 per cent compared with February 2014. 

But what’s driving this rise in house prices? We all know that investment from overseas (mostly mainland Chinese) buyers is a major factor. But is that the only factor?

Some facors may be in this well-publicized editorial about the three key reasons why many Vancouverites are also able to afford the city’s high real estate prices. But there is one crucial factor that we haven’t delved into, and that is wealth transfer within families.

Here’s what’s happening in increasing volumes. Baby-boomers (aged 51-69) have been seeing their parents die and inheriting their estates – paid-off homes and investments that have increased massively in value. The thing is, the baby-boomers are already well established and have their own real estate assets – indeed, this is Canada’s wealthiest generation ever. So many of them don’t really need the inheritance for themselves, and look instead to help their own children – Gen X and, to some degree, Y.

These 21- to 45-year-olds are the fortunate beneficiaries of a considerable amount of cash from the sale of such estates, meaning that they are often putting huge down payments on their own homes. That makes these homes suddenly affordable to those younger people, despite what might be fairly average incomes. (Another reason why the oft-maligned median-income-to-house-price ratio is largely irrelevant – more on that in the aforementioned affordability editorial, and also here.)

Keith Roy, a Realtor with Macdonald Realty, has been talking to BNN on this very topic (watch the video here). He points out that the International Monetary Fund (IMF) is raising red flags over the increasing numbers of uninsured mortgages, but what that actually means is that more and more people are putting down more than 20 per cent and therefore don’t need to insure their mortgage. Surely this trend proves there is increasing personal equity in the market, which equals stability – not the opposite? Roy is seeing a lot of inheritance transfer from baby-boomers to their offspring, driving up local prices. More parents are helping children buy real estate. As long as the parents are gifting the money, it’s not calculated into their total debt service ratio.

Chris Catliff, CEO of BlueShore Financial in North Vancouver, agrees. He says that his credit union has seen an increase in the number of parents who use their equity to help their children buy into a detached-home neighbourhood. Admittedly, some of these are wealthy immigrant home buyers, but not all of them.

More supporters of the wealth-transfer theory are seasoned industry veterans Tsur Sommerville, a professor at the University of British Columbia’s Sauder School of Business, and the Condo King himself, real estate marketer Bob Rennie. In a 2014 speech to the Urban Development Institute, Rennie said wealth transfer between generations is increasing and will help to keep real estate demand in Vancouver strong.

What does all this ultimately mean for the Vancouver market and would-be home owners? Four things.

  1. Despite mediocre average salaries in the city, there is considerable additional wealth behind the scenes that is making high-priced real estate affordable for a considerable segment of regular folk.
  2. Local house prices are not likely to go down any time soon, as the market is well supported by that wealth.
  3. Even on the off-chance of a soft landing for the market, prices are likely to go down considerably less than 20 per cent, which means most homeowners will not go into negative equity, despite the IMF’s scaremongering.
  4. That if you’re not on the property ladder right now, you should take advantage of current low interest rates to buy into the market, as prices are likely to only rise. (And if you don’t have inheritance to fall back on, buy further out in more affordable areas to build equity.)

Happy house hunting!

- See more at: http://www.rew.ca/news/editorial-wealth-transfer-driving-vancouver-house-prices-not-just-overseas-buyers-1.1791066#sthash.SButUUTW.dpuf



Vancouver’s Top Tier Home Market to Keep Growing


 

Vancouver luxury homeFollowing an increase in sales of 25 per cent in 2014, Vancouver’s $1 million-plus home market is poised to see more steady growth in 2015, according to a Sotheby's International Realty Canada report released March 4.

The Bank of Canada’s decision to maintain historically low interest rates will have a stabilizing effect on the market, and result in “positive gains” for BC and Vancouver, according to the nationwide report.

Ross McCredie, President and CEO of Sotheby's International Realty Canada, said, "Historically low lending rates will be the driving force behind top-tier real estate sales across the country into mid-2015. With both the Ontario and BC economy positioned for growth, the high-end real estate market in Toronto and Vancouver will experience the greatest gains.”

The report adds that the low lending rates “will ease the ability for buyers to enter and upgrade within the real estate market by offsetting price gains, and signal a measured approach to monetary policy that appeals to foreign investors seeking stable real estate markets.”

Sotheby’s noted that in the first two months of 2015, detached single-family homes over $1 million saw a 24% increase in 2014 sales over 2013 and said that gains were anticipated in the coming months. Meanwhile, demand for attached home sales over $1 million is projected to continue its trend upwards as consumers seek alternatives to single-family homes, according to the report.

To view the full report, click here.

- See more at: http://www.rew.ca/news/vancouver-s-top-tier-home-market-to-keep-growing-sotheby-s-1.1781892#sthash.evo9WFTH.dpuf



Home buyers remain active despite reduced selection


VANCOUVER, B.C. – February 3, 2015 – The first month of 2015 saw home sale activity above historical norms, while the number of homes listed for sale trended below typical levels.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver reached 1,913 on the Multiple Listing Service® (MLS®) in January 2015. This represents an 8.7 per cent increase compared to the 1,760 sales recorded in January 2014, and a 9.6 per cent decline compared to the 2,116 sales in December 2014.

Last month’s sales were 14.9 per cent above the 10-year sales average for the month.

“While demand remains steady, we’re seeing fewer homes for sale at the moment,” Ray Harris, REBGV president, said. "This is creating greater competition amongst buyers, particularly in the detached home market. The number of detached homes listed for sale today is the second lowest we’ve seen in four years.

” New listings for detached, attached and apartment properties in Metro Vancouver1 totalled 4,737 in January. This represents an 11.4 per cent decline compared to the 5,345 new listings reported in January 2014.

Last month’s new listing count was 1.2 per cent higher than the region’s 10-year new listing average for the month. The total number of properties currently listed for sale on the REBGV MLS® is 10,811, a 14.2 per cent decline compared to January 2014 and a 4.8 per cent increase compared to December 2014.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $641,6002 . This represents a 5.5 per cent increase compared to January 2014.

With the sales-to-active-listings ratio at 17.7 per cent, the region remains in balanced market territory. “The Bank of Canada’s recent announcement to lower its benchmark interest rate is an important one for home buyers, sellers and owners to note,” Harris said. “A reduced rate could allow you to pay down your mortgage a little faster, save some money on your monthly payments, or change the amount you qualify for. It’s important that you do your homework and understand how these announcements impact your situation.”

Sales of detached properties in January 2015 reached 781, an increase of 7.3 per cent from the 728 detached sales recorded in January 2014, and a 44.1 per cent increase from the 542 units sold in January 2013. The benchmark price for a detached property in Metro Vancouver increased 8.4 per cent from January 2014 to $1,010,000.

Sales of apartment properties reached 809 in January 2015, an increase of 7.4 per cent compared to the 753 sales in January 2014, and an increase of 40.5 per cent compared to the 576 sales in January 2013. The benchmark price of an apartment property increased 2.5 per cent from January 2014 to $382,800.

Attached property sales in January 2015 totalled 323, an increase of 15.8 per cent compared to the 279 sales in January 2014, and a 38.6 per cent increase from the 233 attached properties sold in January 2013. The benchmark price of an attached unit increased 4.3 per cent between January 2014 and 2015 to $479,600.