2016 marked an exciting yet concerning year for Canadian Real Estate. Home prices skyrocketed and realtors couldn’t find a moment to breath amidst the ensuing chaos of a red-hot market. Low inventory, foreign buyers, as well as a strong demand were all contributing factors, and the powers that be struggled to find ways in which to tame the market. A foreign buyers tax was one of the biggest initiatives put forth, and it did seem to make a small difference immediately following its implementation. Sales started to slow down, and it seemed as though relief may be in sight. But here we are 4 months into the year, and it appears the market still isn’t ready to make any sense; despite a lower sales volume, inventory remains low, and condo and townhome pricing is continuing its meteoric rise.
When looking at the overall transactions in the beginning of 2016 compared to the beginning of 2017, you would think that house pricing would be much lower this year compared to last. However, this does not appear to be so in the case of condos and townhomes. In February of 2016, sales of detached houses, condos and townhomes reached a record high of 4172 transactions. No wonder realtors couldn’t find a minute to themselves. Fast forward to a year later, and February of 2017 has just about cut that number in half to 2425 transactions in total. This is down 41.9% to be precise, and it marks a 7.7% decline compared to the 10 year February average. Despite this massive year over year dip in sales, condo and townhome pricing is continuing its gradual climb, and realtors are reporting the continued trend of bidding wars with every buyer they take on.
With that said, February of this year did see an increase in total sales volume when compared to January of this year; the number of residential transactions rose 59.2%. The province did implement a new initiative in January aimed at making it easier for B.C. first time buyers to source down payments. This initiative targets mostly condos and townhomes, so it appears the change has encouraged more first time buyers to jump into the market despite growing concerns related to it’s stability. But more buyers on the market isn’t the answer to the continued increase in pricing; with inventory remaining low, this has encouraged more bidding wars. More bidding wars means everything goes for over asking price. What the market really needs, is more sellers.
However, detached home sales in Greater Vancouver tell a different story. The price of detached houses sold in Vancouver in February of 2017 did mark a 3.2% decrease averaging $1.76 million when compared to the average of $1.82 million in February of last year. So, the detached market does seem to be settling down to a degree. Perhaps these new initiatives will be able to keep overall sales transactions at a reasonable level by aiming its sites at condos and townhomes while allowing the price of detached homes to become slightly more reasonable. To compare, the average condo pricing in Greater Vancouver has jumped to $603,737 over the past year, and the average cost of a townhome has jumped up to $827,893. These marks 13.7 and 10.8 percent increases. Really, this should come as no surprise; with a new initiative in place to aid first time home buyers, those first-time home buyers will be looking for homes they can afford. This means condos and townhomes, as there are very few first-time buyers who can afford a detached property.
So, as it stands, the bidding wars have cooled off for detached homes but are still very much present when dealing with condos and townhomes. What this all means is still up in the air. The new initiative certainly will not help to make condos or townhomes more affordable, but it should continue the trend of decreased pricing in the detached market. But how will this affect the overall market? That much is yet to be seen. With there still being such a minimal number of new listings available, it’s hard to imagine that the market will stabilize because of the actions taken so far. If demand out weighs supply, the bidding wars will continue. On the plus side, it doesn’t seem as though anyone’s equity will be decreasing by any alarming rates any time soon, but some of you folks sitting on gold mines may want to consider listing before the market corrects itself; the economy simply cannot sustain a continued increase in home pricing that exceeds the rate of inflation. Food for thought!