Real Estate

Vancouver housing bubble?

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Where do these SFD numbers (monthly average housing prices) come from?
adamtheman wrote: Updated on front page for December 2016.

Prices up 2% YoY
Listings up 48% YoY
Sales down 52% YoY

My opinion on the matter? Who cares if listings are up and sales are way down! Prices are still going UP UP UP!!! Plus the market will rebound in spring when HAM returns and buyers enter the market. And assessments just came out and they are saying everyone is rich. What a time to be alive. I feel like dancing...

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Have you guys noticed businesses in Vancouver begininng to close or slow down at all near the core regions? Curious as Im trying to predict what will happen with Toronto
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I was going through some recent sales from the package that the real estate agent sent with those statistics from SnapStats. The agent include 4 resent sales in September (1), October (2) and November (1) around the Metrotown area. The September and October sales were sold at between 10 to 20% below assessed value (as per the BCAssessment.ca) while one of the October properties and the November one sold at assessed value. So it looks like the market is picking back up (as far as price goes) in the past few months.
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craftsman wrote: I was going through some recent sales from the package that the real estate agent sent with those statistics from SnapStats. The agent include 4 resent sales in September (1), October (2) and November (1) around the Metrotown area. The September and October sales were sold at between 10 to 20% below assessed value (as per the BCAssessment.ca) while one of the October properties and the November one sold at assessed value. So it looks like the market is picking back up (as far as price goes) in the past few months.
That is my feeling too, but sale prices seem to be all over the place now. There are decent deals to be had if one looks hard.
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adamtheman wrote: A big 10-4 (yes) to that. It's only anecdotal but I have noticed numerous businesses shut down. Both small and medium sized. Restaurants are being especially hard hit, but it's really all over the place. One complex I know of has lost 5 businesses this year, about 20% of all retail space and it has "For Lease" signs up on all of them still. This shouldn't really come as a surprise to anyone because with housing prices coming down, or at least the threat of them coming down, people close their wallets and stop spending on non-essential things. That's why eating out is one of the first things to go, followed by entertainment etc.
Yeah I figured, just wanted to see if it was hitting already. i kinda of started seeing for lease on busy streets in Toronto, first sign that its starting to hit. Aside from the facat all the venues for entertainment keep getting smaller.
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mudd_stuffin wrote: That is my feeling too, but sale prices seem to be all over the place now. There are decent deals to be had if one looks hard.
How do you look hard? MLS?
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adamtheman wrote: A big 10-4 (yes) to that. It's only anecdotal but I have noticed numerous businesses shut down. Both small and medium sized. Restaurants are being especially hard hit, but it's really all over the place. One complex I know of has lost 5 businesses this year, about 20% of all retail space and it has "For Lease" signs up on all of them still. This shouldn't really come as a surprise to anyone because with housing prices coming down, or at least the threat of them coming down, people close their wallets and stop spending on non-essential things. That's why eating out is one of the first things to go, followed by entertainment etc.
What Adam says, and to add to it, I've seen various newspaper reports talk about this. British Columbians and reportedly Canadians overall are in over their heads with high household debt. Mortgages, esp in Vancouver, are a large component of this.

Ergo, the amount of wallet left is having an effect on the economy - small to medium being hit the hardest first.

The other thing I read about once in a while is the talent drain.
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DDHLeigh wrote: New article out. 2016 split into two halves but still a price gain.

http://vancouversun.com/business/real-e ... e-slowdown
What adam says above - Spring will make or break.

And to his point, the last two years inventory has been EXTREMELY low with most sellers holding on and the available properties snatched up like hotcakes.

Crystal ball, crystal ball...
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canucky1 wrote: The other thing I read about once in a while is the talent drain.
That's going to be in question... There are also stories out there that with the situation in the US, many Canadians who moved down to the States for jobs in the last 5 years that don't have a Green card or taken up dual citizenship may have issues staying down there and may start to move back up here. So, if you compare our prices with prices in San Francisco with the exchange, Vancouver is some what affordable.
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adamtheman wrote: Spring is either going to be make or break.
Forget about Spring... it will depend on when financing charges (ie mortgage rates) start moving upwards again. And it's not about who most people are thinking of but rather those developers who have purchased properties and leaving them empty because they can't decide when they are going to develop the property. Basically many of them are using bridge financing (standard for most builders) to finance the time between purchase and develop/sale. Currently, those rates are 'cheap' as the short term rates are cheap but if the short term rates go up, the bridge financing rates go up and they typically can't lock in to lower rates.

I know of one developer who purchased a few houses on the West side but allowed the previous homeowners to stay in the house until the developer wants to start construction. Since the home sold for north of $3 million, there's a 'small' carrying charge now but once the rates go up that small carrying charge is going to get bigger and bigger. Combine that with the prospects of the property's price going down, I can see a few nervous lenders out there which might force the developer's hand to sell sooner rather than later.
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In today's Globe and Mail, they have an article on a new wave of money transfer crackdowns by the Chinese government - http://www.theglobeandmail.com/real-est ... e33485996/. It's an interesting read as it basically splits the previous influx of Chinese funds into two groups - middle income and high wealth - and points out that the middle income 'investors' are the ones that the Chinese government is really targeting as the high wealth ones will always find a way to get their funds out. If the trend holds true, I believe that there should be not only a lower level of actual home purchases but also an overall reduction of foreign owned homes in general.

Why? Since many of the Chinese middle income purchasers are looking to move their families out of the China while the breadwinner stays in China to run the business (if you are high wealth, you can hire people to run the business but middle income can't), additional funds are usually transferred from China to Canada for the normal family expenses - ie. cars, food, school... According to studies in the past few years, there are many neighbourhoods in Richmond and certain other parts of the Lower Mainland (Vancouver and Burnaby mainly) which have a high concentration of owners who have 'no appreciable' income and qualify for free government services living in multi-million dollar homes. Most of these owners are probably the families of those Chinese middle income purchasers. With the Chinese government cracking down on these money transfers, the families won't have the money to stay where they are as they are dependent on those money flows from China.

Here are a few highlights from the article:
Now, authorities in China are taking new steps to bar individuals from putting their cash into overseas markets to buy homes and other investments, a change with important implications for cities such as Vancouver and Toronto where Chinese buyers had contributed to frenzied property trading.

Under the new regime, the number of buyers will “drop sharply,” said Andy Xie, a China economist formerly with Morgan Stanley.

Those selling homes to Chinese buyers should brace for their “business to shrink dramatically,” he warned.
People in China, who can normally only convert $50,000 (U.S.) a year in foreign currency, have long been technically barred from buying property overseas, but those rules have not been rigorously enforced.

At the outset of 2017, however, China imposed a series of new documentation requirements on currency transactions and punishments for using money in ways the rules don’t allow.

Before, changing yuan into loonies could be done with the tap of a smartphone screen. Now, banks have begun requiring paperwork that entails submitting for approval the reason a person wants to obtain foreign currency and when it will be used. A new rule then holds people liable for what they do with that money – and could bar them from exchanging money for up to three years if they are found to have used it improperly, such as for the purchase of a home.

The rich, with corporate assets and access to sophisticated market tools for stealthily routing money around the world, are unlikely to feel much difference from the change.

But for the middle class, which has become an important force in property markets in places such as Canada, the United States and Australia, “it will have a big impact,” Mr. Xie said.

Families that once bundled together converted currency to buy condominiums and modest houses abroad will face new inspection of their currency conversions and new risks to falling afoul of the rules.

Mr. Xie expects many to simply abandon the idea, particularly since the rules also give banks much more latitude to simply deny transactions. He expects authorities to give banks quotas, in a bid to keep the country’s foreign reserves from dipping below $3-trillion, a line Beijing does not want to cross, he said. In November, China’s foreign reserves stood just $50-billion from that mark.
The new currency rules could even motivate more Chinese buying by making “people more worried about the security of their assets and more eager to move them overseas,” said Anne Stevenson-Yang, co-founder of investment advisory J Capital Research.

Chinese investors tend to be nimble in finding ways around new rules, too. “It takes about a month before people find the next channel,” Ms. Stevenson-Yang said.
What China is doing with capital controls is similar to its successful management of the Internet. Access to censored websites “is not impossible from China, but it’s just a big hassle, and because it’s a hassle, very few people manage to do it on a regular basis,” said Victor Shih, who specializes in Chinese fiscal policy at the University of California, San Diego.

The goal with currency conversion restrictions “is exactly the same – to create enough friction to deter the vast majority of people from converting sizable amounts of money,” he said.
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True... if, of course, you believe the meme that China runs Vancouver's real estate market. Sure, it has an impact, but the impact of this news article on the local buyers is likely to have a larger influence than actual cash outflow in and out of the city... imho.

In short, fear drives markets up (or down). When you remove that fear in the eyes of the public... fear of loss can cause a cascade in the opposite direction.
I'd love to write history... in advance.
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atomiton wrote: True... if, of course, you believe the meme that China runs Vancouver's real estate market. Sure, it has an impact, but the impact of this news article on the local buyers is likely to have a larger influence than actual cash outflow in and out of the city... imho.

In short, fear drives markets up (or down). When you remove that fear in the eyes of the public... fear of loss can cause a cascade in the opposite direction.
It's not that the Chinese money runs the real estate market in Vancouver... it's more a question of more supply and less demand. With the reduction in inflows, there will be even less demand that may come back even with possible declines in the Canadian dollar - even a small fraction of lower demand may be enough to tip the market even more. Also it makes it harder for the existing families to stay without any spending money so some of them may just sell now that the prices are still inflated, move to another area and use the difference to live on for a few more years and thus increase the local supply in an what seems to be an increasing over supplied market given the inventory builds in the past few months.

As for local buyers, they, for the most part, are still priced out of the detached market so regardless whether they want to buy a house or not, they simply can't afford to buy especially with the possible interest rates increases in the coming year. The condo market will still probably be robust as the government programs will help it move along.

Short term - there may be an increase in purchases but that increase would probably be in other geographical areas than Vancouver due to the fact that the market's momentum has changed in recent months. I would expect an up tick in Toronto or the US as the last of the current funds runs out for purchases.
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canucky1 wrote: How do you look hard? MLS?
MLS is just a starting point.

I would say if you were serious looking, you should start keeping track of DOM, listing price history, (recent) comparables in the pocket and what pockets are holding up vs which pockets are dropping. Then compare the prices to assessed value on the BC assessment website. The assessed values are only a guide and are not precise but they nonetheless provide a benchmark because July 1 2016 is close enough to the effective date of the FBT in Vancouver.
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mudd_stuffin wrote: MLS is just a starting point.

I would say if you were serious looking, you should start keeping track of DOM, listing price history, (recent) comparables in the pocket and what pockets are holding up vs which pockets are dropping. Then compare the prices to assessed value on the BC assessment website. The assessed values are only a guide and are not precise but they nonetheless provide a benchmark because July 1 2016 is close enough to the effective date of the FBT in Vancouver.
Thanks mudd_stuffin - But where do you get that type of data? I know the realtors have it but they don't "share"
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adamtheman wrote: The problem is that, given the high amount of inventory and the low amount of sales, prices can only be sustained for so long. My guess is that a lot of people are waiting until Spring to see if the market rebounds. For that to happen, however, listings would need to drop first, then sales would need to rise. Last year, Vancouver saw some insane listing-to-sales ratios. Almost unheard of. Look at the numbers for detached houses:

In December 2015, there were 2497 new listings added, and 1141 sales.
In December 2016, there were 3711 new listings added, and 542 sales.

So it's gone from a 2,19 to 1 ratio (listings to sales) to a 6.85 ratio.

That's basically triple. That means compared to last year, every buyer has 3 times the options to choose from. And for every person who lists their home, only 1 out of 6.85 will sell (basically 1 out of 7).

So to put that into a scenario... you and 6 of your neighbours list your homes. So there's 7 houses for sale on your street. Only one of the houses will sell, the other 6 won't. A buyer drives down the street in his car and gets out. Whoever offers him the best deal will sell their house. It's more likely one of the 7 sellers will crack and reduce their price.

Compare that to last year, when only 2 houses were for sale. Now it'a sellers market. The buyer only has 2 houses to choose from. Chances are he won't like one of your houses, so he is basically going to have to pay what you ask.

This is sales-to-listing ratio 101 for dummies. I am sure you know this, but I am posting it for others.

So when people say that they feel like the "market is picking back up" the stats don't show that, at least not right now. Everything is working against Vancouver.

Spring is either going to be make or break.
Actually, 1 out of 6.85 is app. 15% which is the sign of a balanced market, at least based on real estate industry. (What percentage is reflective of a balanced market is debatable... I am just saying.) This is using numbers which I will assume to be correct for a moment.

So i would definitely say that the price increases could not be sustained.

Where do you get 3711 new listings added for 12/16? I see 1312 based on REBGV.

The number of new listings for apartments and attached was actually lower for 12/16 vs 12/15.

If you look at the daily stats, there are signs that the market is picking back up. Look at the last few days of 2016 in terms of sales vs new listings: http://www.robchipman.net/
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canucky1 wrote: Thanks mudd_stuffin - But where do you get that type of data? I know the realtors have it but they don't "share"
You are welcome.

It is a lot of homework and I follow the market quite closely. But as a start, I always have a handful of properties which would intrigue me (even though I am priced out, at least based on current financial situation).

Then I would follow the properties - seeing whether the properties are still on MLS (or Zolo which is a better site) after about 7-14 days on the market. If the property is priced right and assuming non-maniac market conditions, the property should sell. Zolo has DOM info but you would need to sign up with them. (The DOM info disappears if the listing disappears but if the listing remains and the price drops, Zolo will tell you.)

You can look at relatively recent sales for the pocket you want from the BC Assessments website.

But overall speaking you are correct - you need to work with an agent. I have an agent in Vancouver who I bug intermittently for an update of the market.

I would also caution that blogs and news may be written up with a bias. It may be that the writer or editor cherry picks sales data to show a certain price behaviour (recently, that would be crashing) but there is a lot more to the market that what you read in the news. There is definitely more than what meets the eye. When a news story reports that a house dropped $1M in listing price, they might not mention that the listing price was 40% above the July 1 2016 assessed value or the property might be a heritage property (or both). I say this even though I never dismiss any blog or piece of news which may have some bias.
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craftsman wrote: That's going to be in question... There are also stories out there that with the situation in the US, many Canadians who moved down to the States for jobs in the last 5 years that don't have a Green card or taken up dual citizenship may have issues staying down there and may start to move back up here. So, if you compare our prices with prices in San Francisco with the exchange, Vancouver is some what affordable.
Or what I have also heard is that they may stay down there but move money up here.

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