By Ron Friesen
I keep looking for some change in direction for the Vancouver residential real estate market, but the numbers for June from the Real Estate Board of Greater Vancouver show continued increases in their Home Price Index for all property types in almost every area. The only exceptions occur in the June 2017 over May 2017 HPI change for townhouses in North Vancouver (-1.0%), Squamish (-6.3%) and Whistler (-5.8%).
The resistance of the market to respond to lower sales volume (demand) can be explained by the lower volume of available inventory of homes for sale (supply). The number of sales of detached homes from April through June 2017 dropped 24.4% over the same period last year. This drop in number of sales coincided with a virtually even level of inventory from one year earlier while prices for these detached homes have remained relatively steady, with modest year-over-year increases in some areas and modest drops in others.
The greatest year-over-year movement in prices for detached homes came from outlying areas covered by REBGV. Whistler, Squamish, Sunshine Coast and Bowen Island showed HPI increases for detached homes from 15.8% to 19.7% higher. Maple Ridge (+12.1%) and Pitt Meadows (+10.5%) also showed strong price growth for detached homes year over year.
Other areas saw detached home prices drop year-over-year. Ladner (-6.4%), Tsawwassen (-4.1%), West Vancouver (-4.4%), Burnaby North (-3.5%) and Richmond (-2.8%) all selling lower. There have been small value rebounds in each of these areas over the past six months.
In contrast, the attached home market, condos and townhomes, has been improving its values. Prices for apartments in all areas are in positive growth showing year-over-year HPI increases between 10.5% and 27.6%, with only Ladner (-4.4%) and Tsawwassen (-1.5%) in negative territory. And year-over-year HPI for townhouses in all areas is up from 5.4% in Vancouver East to 19.8% in Pitt Meadows.
Investors Dig Deeper And Blend Research
When I dig deeper into the statistics for residential real estate sales in Greater Vancouver I start by comparing areas within the region. For example, looking at the cost-per-square-foot charts for resale market apartments in Vancouver East, Vancouver West and North Vancouver I see some differentiation. In Vancouver West where prices continue to lead this group the cost per sqft vector is relatively level, though continuing to show some lift.
The Vancouver east cost per sqft line shows the steepest rise continuing since early April. North Vancouver showed good increases in cost per sqft back in February, but began to drop at end of May and continues down gently in contrast to the other two areas in this comparison.
There continued to be a trend of selling over asking price in June, but this statistic can be deceiving as it does not take into account the pricing strategies of many sellers. It does show however the continuing competitiveness of the resale condominium sector of Greater Vancouver’s residential real estate market.
One of the most telling statistics to help understand the market is the Sales-to-Active listings ratio. We have seen the S:A ratio in Vancouver East rise steeply from April and continuing throughout June to 1.86 while the ratio for Vancouver West is only maintaining around 0.76. At the same time the HPI for Vancouver East has risen approximately 5.7% to a benchmark price of $507,700 while in Vancouver West the HPI has risen 7.6% to a benchmark price of $772,900.
A Sales-to-Active listings ratio of 1.86 is extraordinary showing a market strongly favouring Sellers. The North Vancouver S:A ratio for June 2017 was an impressive 1.79.
Security Begins With Predictable Change
Many other market influences beyond the REBGV statistics are affecting the region’s real estate performance. We still do not know the effect of the foreign buyers tax instituted by the Provincial Government back in August 2016. The statistics seem to show it is not having a significant or lasting effect.
Are we worried over the thinking of the incoming BC government, as expressed in their public comments? The suggestion is the BC NDP and Green Parties will lead the province into even greater amounts of meddling in a free market system which seems to be working precisely as one would expect. Investors and working people alike need to see clearly and understand what to expect when they expose their earnings into a free market. Intervention disrupts the flow of cause and effect causing as much damage to the population as any benefit.
Imagine those who have invested the better part of their personal equity into a property after making well-advised and conscientious decision to invest in residential real estate, either as a home or as an investment. The gears and cogs are turning and everything is working nicely and as expected. Then along comes a group of well doers with very little appreciation for the long-term effects of their well-intentioned ideas. They decide to try something in the interest of helping society as a whole. In goes the idea, like a wrench dropped into the turning machinery. I may be wrong, but I’ve been around long enough to witness government regulation lead most often to harmful outcomes for many and very little positive benefit for anyone.
Let us hope the rhetoric of greater foreign buyer taxes and increased Property Transfer Taxes do not materialize. I fear these continuing practices will harm many who are now invested in the market to the extent of the greater portion of their personal wealth.
Please don’t get me wrong. I am not against change. There are many ways to improve the lives of citizens without severe government intervention, unfair taxation and the introduction of more complex regulations. The City of Vancouver is experimenting with means to free up much-needed long-term rental space, and the initial ideas sound interesting. The proposal seems to be about creating a business model for short-term renters to follow. I do not mind the idea of businesses being required to compete with other businesses (hotels) in an equitable way.
I have similar feelings about Uber. Why should an industry be infiltrated by competitive services from suppliers who do not answer to the same rules as their industry cohort? Rules and regulations should be applied to achieve equality within an industry or a market, not to disrupt those already invested.