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What's happening in the Vancouver Condo Market

What's happening in the Vancouver Condo Market

Since mid-August, Vancouver’s new foreign-buyer tax has caused a stir of commentary about the future of Canada’s real estate market. If you haven’t heard, the foreign-buyer tax imposes a 15% property transfer tax on all non-Canadian buyers who purchase residential real estate in Vancouver. That translates to $105,000 in additional taxes on a $700,000 condo (average 800 square-foot for Vancouver).

Changes in the Vancouver Condo Market

There have been a lot of different reactions to the new tax. Non-Canadian homeowners feeling frustrated and unwelcome, local Vancouverites concerned solely with cooling the Vancouver market, others expecting little change unless further efforts are made to improve supply, and economists saying the tax is nothing more than a “temporary disruption.” But it’s not temporary for everyone. One group of foreign buyers has filed a Class-Action Lawsuit against the B.C. government, effectively representing every non-Canadian who the tax has disenfranchised. But the Supreme Court could take months or even years to certify the case. So after almost a decade of steadily rising prices, changing tides have finally come to the west coast. Wondering if it’s a smart time to turn an eye to condos for sale in Vancouver ? Well, the future may be promising.

First off, let’s talk about softening prices. According to a recent article in Global News, “Foreign buyers are leaving Vancouver en masse.” Based on data pulled from Juwai.com, China’s leading real estate website for finding condos and houses in Canada and other countries, “there was an 81 per cent drop in buying inquiries in Vancouver in August [2016] compared to August 2015.” That significant decline in demand seems to have put pressure on sellers to lower prices. But in general August tends to be one of the slowest months for real estate activity, so it’s a difficult month to use as evidence toward larger trends.

Additionally, Global News collected MLS data on a range of Vancouver properties sold under asking price in August that “show price drops between 3.5 and 20 per cent.” This data supports the “sudden price drop” story, but Vancouver has been experiencing a trend of declining real estate prices since February 2016. According to the Financial Post, the chief North American economist at Capital Economics, Paul Ashworth, attributes these price drops to an established system of “irresponsible lending and rising domestic debt,” not the foreign-buyer tax. Either way, the declining price trend is occurring mostly within the “housing” market, typically the luxury West Vancouver million-dollar houses now averaging “$3,982,000 – down from $4,245,000.” The Vancouver condo market, on the other hand, is alive and well. Our Vancouver Condo Pro, Andrew Way, says, “Year over year prices were up over 30%! Let's say we had a decline in prices of 10% or even 20%, which I think is unlikely, we would still be up year over year.” He went on to add, “Now is a good buying opportunity. Many offers over the last year had no conditions and there were multiple bidding wars which drove up prices. Now you can actually get in a few conditions for the buyer and do a little negotiating. It's still a seller’s market but the scale has tipped.”

Speaking at the Urban Development Institute’s Foreign Buyer Tax panel debate in September, the chief economist at Central 1 Credit Union Helmut Pastrick said the shock of the foreign-buyer tax is “a temporary market disruption [that] will play out over the next three to six months.” He added, “After the market has absorbed this new tax regime, we will begin to see other market fundamentals come into effect. Prices will then continue to rise, and they will be higher this time next year.”

That being said, the trend of softening housing prices is expected to continue over the coming months, before they will likely level off. The step back of foreign investors and the current cooling market should translate into less pressure on buyers, listings staying active longer, and hopefully increased supply. Again, let’s be clear, the news of declining prices in Vancouver is a trend seen mostly within the “housing” market, while Vancouver condos continue to sell at asking price or higher. Average condo prices have actually “increased 26.9 per cent from August 2015 . . . a 6.1 per cent increase over the last three months,” according to REBGV.

As we showcased in our World Condo Prices blog post, the average condo price per sqft in Vancouver is $900. While we recognize that Vancouver is an expensive city, the condo price per sqft analysis shows considerable growth potential compared to other cities globally. When you look at international cities like New York ($1,824/sqft) or London ($2,732/sqft), even considering the differences in city-to-city economic conditions, Vancouver condos stand out for affordability. And right now, in the atmosphere of a cooling market, we see it as a smart moment to start looking west.

That’s why Condos.ca has decided to expand out to Vancouver, bringing our research expertise, data analysis, and Condo Pro sales guidance to the west coast. Our main man on the ground right now is Condo Pro, Andrew Way , and he says, “Vancouver’s an incredible city with 30-40,000 people a year moving here; there will always be demand in this city.” If you want to find Vancouver condos on the market today or you want to list a current condo, don’t hesitate to contact Andrew.

Speaking of cooling markets, did you read our earlier blog post about how to cool the Toronto real estate market ? If not, check it out!

Sources:

[1] According to Metro 2040 Residential Growth Projections