There’s been endless news articles during the past year talking about the Vancouver real estate market and if the bubble will pop anytime soon. Of course, none of us have a crystal ball to foresee the future, but as a real estate agent and investor who is very active in the housing market, this is what I see happening currently.
1. Mortgage Rates Increase & Stress Test. Interest rates are gradually increasing and they are predicted to increase even more by the end of July and again before the end of 2018. In addition to the increase in rates, people who had an accepted contract after Jan 1, 2018 were required to qualify at 2% more than what their actual mortgage rates are, thus allowing Buyers to qualify for about 20% less than if they purchased before January 1st. Many Buyers just simply cannot qualify any longer to purchase a home that they want and it’s predicted that some people who have purchased a pre-sale property may not be able to get a mortgage at completion which is a date in the future.
2. Historic Appreciation. Real estate prices appreciated at historic levels in 2016 and 2017, as much as 30% per year in both Metro Vancouver and in Fraser Valley. This growth cannot be sustainable, and we are seeing a drastic slow-down in the market today with single-family homes actually depreciating anywhere from 10-25% in value from last year.
3. Reduced Foreign Buyers. Since August 2016, the BC government introduced a slew of taxes like the Foreign Buyer’s tax, Empty homes tax, Speculation Tax, increased Property Transfer Tax for properties over $2M, increased school tax for properties over $3M, just to name a few. It seems the BC government is penalizing foreigners and as a result, we are seeing much less foreign buyers these days.
4. End of the Bidding Wars. All through 2016, 2017, and from January to April 2018, it was common to witness multiple offers, with people bidding in some cases hundreds of thousands above the asking price with subject-free offers on properties. Today, we see the opposite: buyers are now able to negotiate on the asking prices and to put in the appropriate subject clauses to protect their interests. What used to be a platform for sellers to capitalize on their financial gains from appreciating properties has now become an opportune market for buyers, especially in the detached market.
5. Pre-Sale Condo’s and Townhouses Line-ups. Though the condo & townhouse market is still strong, we are not seeing long, frenzy line-ups at pre-sale projects today, especially in the Fraser Valley. There are select projects in Vancouver, Burnaby and Coquitlam that are selling well, but there is definitely a slow-down for pre-sale purchases. We’re seeing developers offer incentives such as 5% down payment only, 0% assignment fees, and increased REALTOR® commissions to name a few.
In addition to these 5 factors, according to the Vancouver Real Estate Board, residential home sales totalled 2425 in June 2018 a 37.7% decline from 3,893 sales recorded June 2017 and 14.4% decrease compared to May 2018.
June’s sales were 28.7% below the 10-year June sales average. The total number of homes currently listed for sale on the MLS in Metro Vancouver is 11,947, a 40.3% increase compared to June 2017 (8515). Sales to active listings ratio for June 2018 is 20.3%. Which means of all the active listings, just over 20% got sold.
I am predicting that prices will continue to decline in the detached market, and that condos and townhouses will remain flat for the remainder of 2018. Will we have a market crash? We have yet to find out.
For condo and townhouse owners, I feel this will be your last chance at selling to capture the crazy high appreciations we have had, and for all us investors, I suggest we sit tight for the rest of this year and scoop up the bargains come 2019.