Metro Vancouver continues to experience above-average demand and below-average supply
In the report, REBGV president Jill Oudil said: “We’re seeing steady demand in today’s market. Home buyer activity is operating above our long-term averages, particularly in our townhome and condominium markets.” “While we’re seeing more listings enter the market today than we saw at this time last year, we have a long way to go before our home listing inventory rises back to more historically typical levels.”
We can see the buyer demand and seller supply from the sales-to-active ratios:
- Sales-to-active listings ratio for November 2017 was 32% for all property types (upward pressure on price if ratio remained 20% for sustained period – which has been the case since March 2015)
- Sales-to-active listings ratio for different property types in November:
- 16% for detached homes (balanced supply and demand when ratio between 12-20%)
- 36% for townhomes (seller’s market – upward pressure on price)
- 68% for apartments (seller’s market – upward pressure on price)
The sales to active ratio for all property types in Greater Vancouver had remained above 20% since March 2015, putting upward pressure on home prices (see graph below):
As a result, home prices have been increasing since March 2015 when the Sales-to-Active ratio has reached above 20% for sustained period of time. Below is a 5 year graph of the HPI benchmarks which represent the price of a typical property within Greater Vancouver:
Sales-to-active listings ratio for September 2017 was 33.1% for all property types
Sales-to-active listings ratio for different property types:
- 16.8% for detached homes (balanced supply and demand)
- 44.8% for townhomes (seller’s market – upward pressure on price)
- 66% for apartments (seller’s market – upward pressure on price)
REBGV president Jill Oudil reported: “Conditions continue to vary significantly based on property type. The detached home market is well supplied with homes for sale, which is relieving pressure on prices. It remains a much different story in the townhouse and apartment markets. Buyers of these properties continue to have limited supply to choose from and are seeing upward pressure on prices.”
“The growth in our provincial economy and job market is contributing to today’s demand,” Oudil said. “The federal government’s announcement of plans to tighten mortgage requirements for the seventh time in the last eight years also helped spur activity in the short term. Many buyers are trying to enter the market before the changes are in place.”
Click here for full report
The biggest news in real estate this past month is no doubt the controversial mortgage stress test.
It will be aimed at people with heavier debt loads and at least 20% equity. Given where Canada’s home prices and debt levels are, this is easily the most potent mortgage rule change of all time.
It’s like a two-point rate hike: Uninsured borrowers can qualify for a mortgage today at five-year fixed rates as low as 2.97%. At the beginning of next year, that hurdle will soar to almost 5%. Meaning, you could need upward of 20% more income to qualify for the same mortgage that you could get today.
The Office of the Superintendent of Financial Institutions (OSFI) said this change will make sure people can afford much higher rates and it will substantially increase the quality of borrowers at Canada’s banks. OSFI argues that this will insulate our banking system from economic shocks.
In a Globe and Mail article, critics say this new mortgage stress test will push borrowers to riskier lenders, click here to read the article.
Many questions were raised:
- Whether this was all necessary, given already slowing home prices, provincial rule tightening, rising rates and the fact that uninsured default rates are considerably lower than for people with less than 20% equity.
- Does growing debt risk in the non-prime mortgage market, combined with home price risk and a potential drop in employment and consumer spending truly lower banks’ risk?
Industry economists like Will Dunning said scores of borrowers will be forced to defer buying, pay higher rates, find a co-borrower and/or put more money down to qualify for a mortgage. Click here to see the video.
OSFI says its responsibility is to keep banks safe and sound. Overly concerning itself with the side effects of its mortgage stress test is not its mandate.
Home buyer demand continues to differ based on housing type
Click on the above to read the News Release from the Real Estate Board of Greater Vancouver. Summary below:
- August 2017 home sales were 20% higher than the 10-year August sales average.
- September 2017 home sales were 13% above the 10-year September sales average.
- Sales-to-active listings ratio for August 2017 was 35% for all property types
- Sales-to-active listings ratio for September 2017 was 30% for all property types
- Sales-to-active listings ratio for September 2017:
- 14.6% detached homes (balanced market – slowed upward pressure on price)
- 42.3% for townhomes (seller’s market – upward pressure on price)
- 60.4% for apartments (seller’s market – upward pressure on price)
Buyer demand continues for Townhomes and Apartment condos. We find the demand for single family home is still there, especially for homes that were well priced.
Since it’s rapid increase this January, we are seeing the Sales-to-Active ratios (for all property types) started to decrease after reaching its peak so far this year in May 2017 (see graph below).
The HPI benchmark price for all property types in Greater Vancouver continued to rise, although at a slower rate, since the ratio remained in the seller’s market.
According to First National Financial LP “Market watchers appear to be taking the same “wait-and-see” approach to interest rate hikes as the Bank of Canada” Read full article here. Summary below:
- Economic data that support further interest rate increase:
- Employment numbers show 10th straight month for gains
- Wage growth popped up by 2.2% in September after months of sluggish growth. Hourly average wage reaching $26.36.
- The two key factors that support “wait-and-see” approach:
- July GDP was flat which forecast a slowing for 2nd half of the year
- Household debt remained a concern and a determining factor in future rate increase.
The August GDP numbers will come out at the end of this month and they will help determine if there is a trend.
On September 6 – The Bank of Canada has raised its key interest rate by one-quarter point to 1% after having raised it to 0.75% back in July. To view the announcement – click here.
- The Bank of Canada says the decisions were based on much higher than expected growth in Q2 GDP.
- GDP expanded by 1.1% in the second quarter, for an annualized growth rate of 4.5%. It was the fastest increase in growth in 15 years.
- The growth is being fueled by consumer spending, strong job growth and low interest rates. Business investment and exports also made significant contributions.
- In the month of June the economy was led by construction which, in turn, was led by housing – particularly condos.
- The bank left the door wide open for another hike in 2017. But it also said it will be watching to see how heavily indebted Canadians adjust to higher rates.
The next dates for rate announcements are October 25th and December 6th.
“First-time home buyers have led a surge this summer in demand in our condominium and townhome markets,” Jill Oudil, REBGV president said. “Homes priced between $350,000 and $750,000 have been subject to intense competition and multiple offers across the region.”
- August 2017 home sales increased 22% compared to same month last year. It was 20% higher than the 10-year August sales average.
- Sales-to-active listings ratio for August 2017 was 35% for all property types or:
*16% for single family houses (balanced market)
*45% for townhouses (seller’s market)
*76% for condos (seller’s market)
Click here to view our August 2017 market update video featuring Board President Jill.
Click on the image above to view our June 2017 market update video featuring Board President Jill Oudil.
Demand for condo continues to outstrip supply with a sales-to-active ratio at 93%. Detached home market has returned to Seller’s market with sales-to-active ratio at 25%.
Overall, the sales-to-active ratio has decreased over the last month but the ratio remained above 12% so we will probably not see any price reduction.
The graph below shows the average sales-to-active ratio for all property types in All of Greater Vancouver (REBGV), Richmond, Vancouver and Burnaby.
What I’ve learned from last year was that although the sales-to-active ratio had declined, the sales price did not as long as it remained above around 12%. For single family houses, the price started to drop when the ratio dipped to 13% in August 2016 before it bounced up in February 2017.
In Toronto, home sales collapsed by more than 37% in June as compared to same month last year. New listings shot up by nearly 16% but prices still increased by an average of 6.3%.
Real Estate Board of Greater Vancouver released their monthly stats report today click here to read.
Home sale last month (May 2017) is reaching the “all-time record sales number” of May 2016 and an 23% increase from April 2017 (see infographic below).
“While sales are inching closer to the record-breaking pace of 2016, the market itself looks different. Sales last year were driven by demand for single-family homes. This year, it’s clear that townhomes and condominiums are leading the way,” said Jill Oudil, president of the Real Estate Board of Greater Vancouver (REBGV).
She said first-time home buyers and people who are downsizing from single family houses are both competing for condos and townhomes while the numbers of homes available for sale remained low.
This is pushing the sales-to-actives ratio for condominium to 95%, meaning almost all (95%) of condos listed are sold. The days a property remains on the market remains low. Buyers have to take action right away or risk losing out. It is often looking at the property today and make offer this or the next evening, often with little or no subjects. We are seeing sold price almost $30,000 to $100,000 above asking price for condos!
Single family houses are also returning to sellers market from buyers market at the end of last year with sales-to-actives ratio reaching 31% last month.
The sales-to-actives ratio for townhomes remain strong at 76%.
All property types are now in sellers market. AGAIN.