Two weeks ago we broadly discussed real estate froth at the local, national, and international levels. This week we will take a deeper dive into the local real estate market here in Greater Vancouver.
Greater Vancouver is Strong:
After the 2008 financial crisis, Vancouver was one of the quickest markets to bounce back. Currently, Covid does not look like it occurred when viewing market stats: year-over-year sales growth of 29% in the Fraser Valley, 81.2% sales above the norm in December, and all time highest sales in December ever.
Unlike other markets in Canada, Vancouver is subject to inherent geographic scarcity and cannot simply sprawl wider and wider. With an aging population, the best climate in Canada, and global appeal, Vancouver has strong demand. This market has pushed through foreign buyer taxes, stress tests, and now a pandemic — housing scarcity and strong demand cannot be argued.
Let’s Pull Up Some Numbers
Median days on market:
December’s median days on market have decreased dramatically this year relative to the previous two years, and are in line with what we saw prior to the 2016 housing market rip:
Average percentage of original price:
The typically slow month of December posted nearly the highest average percentage of original price in the previous 2.5 years, regardless of time of year.
New listings and total inventory:
New listings in December were the highest ever, at 2,450 homes being up for sale.
These high rates of new listings simultaneously arrive with low inventory, akin to December 2015, 2016 and 2017.
Although we are having record amounts of new listings coming on the market, total inventory is staying low, squeezing the market to push prices higher.
As a logical conclusion, December sales and dollar volume both reach record all time high levels.
So, What’s Next?
With Greater Vancouver’s real estate market primed to rise this year, we can expect local policy makers to incentivize new home buyers into the market while home prices continue to rise. Additionally, we may see increased taxation on real estate to generate more revenue.
New home buyers will likely be subject to a lack of affordable housing and move further into the suburbs instead of Vancouver itself. Vancouver furthermore antagonizes home sellers by implementing policies buyers hate: attempts to raise property taxes (5% this year), make all street parking permit only, and install tolls do not help its case.
The suburbs are increasingly taking over market share, not just for resale, but also for new homes. With these areas now hosting a wide variety of amenities once exclusive to Vancouver, buyers do not need to compromise their city lifestyle. Downtown Vancouver remains very attractive to those who can afford it, yet the ability to have much more purchasing power with many of the same amenities (and also take a quick train ride into Downtown when needed) makes the suburbs highly attractive.
Where Are People Looking?
Burnaby has become an important site in Greater Vancouver due to its central location, substantial amenities, affordable pricing, and closeness to Downtown. Downtown, the baseline neighbourhood once used to compare against all others, is now replaced with Burnaby.
Alongside homeowners and businesses, investors too will look to Burnaby and surrounding areas like Coquitlam and Surrey to purchase homes. Rental revenues generated in Vancouver are not substantially greater when compared to the higher capital investment investors must pay. Although not completely topped, Downtown and Vancouver have likely filled most of its cup. When compared to the suburbs, this greater capital appreciation and the ability to have space in an affordable detached home makes the suburbs attractive.
What Are The Implications?
For those who can afford or currently live in the city, Vancouver will remain the gold standard for British Columbia real estate. Prices will continue to appreciate for years to come, with the usual volatility that markets see. Simultaneously, with the aforementioned motivations for first time home buyers, investors and commercial owners, going long on the suburbs is a clear path.
The demand we have seen in 2020 has been very largely domestically-based. Once vaccination has been distributed worldwide and a return to normal has set in, the substantially low immigration BC saw last year will spike higher. The subsequent demand will be pushed harder than before, likely to affordable areas in the suburbs.
If you are looking to purchase a home, as an investment or for yourself, NOW is the time to act before the market takes off completely. Call or text 778-866-7762 for more information, or email firstname.lastname@example.org .
Mehar S. Bhogal