As we continue to be inundated by the Vancouver media’s headlines of Crisis, Bubbles, Crashes, Slides and Downturns, I feel it an appropriate time to present a different side to the argument. This is not based on economist rhetoric, geo-political tensions, the evil foreign buyer, money launderers or the need for sensationalism. It’s simply comes from my day to day experiences working in Vancouver, local market statistics, history and the most basic economic concept of Supply and Demand.
The Metro Vancouver real estate market is primed for a comeback. Never have we seen a market with sales and listings numbers like we are experiencing right now. After a very sluggish start to 2019 which has seen the number of sales at historic lows and prices softening throughout the region and property type, May bucked the trend considerably with the total monthly sales finishing 44% higher (or 819 more sales) than in April.
I know what you’re thinking. Big Deal – that’s only one month! Here’s where things get a little different, and where examining the last 3 significant slow-downs Vancouver has experienced can be useful. Let’s take a closer look at these statistics. Prior to the first 4 months of 2019, we’ve seen monthly sales numbers in Vancouver stay below the 2000 unit mark in Fall 1997 – Spring 1999, Summer 2008 – Spring 2009 and Summer 2012 – Spring 2013. All 3 of these periods saw the number of active listings hover around 20,000 total units. What’s unique about the current market is this number is struggling to get over 15,000 total units. Keep in mind this is at a time when the Greater Vancouver housing stock is at an all-time high, with far more dwelling units in existence than years before. In other words, while demand has dwindled, supply has not increased at the same rate conversely.
The lack of homes listed during one of the slowest markets we’ve encountered in 30 years shows that Sellers are not looking to “panic sell.” Some will sell out of necessity and agree to prices below what they would like, others will hold off and wait. This shows a confidence that recovery will occur in the Greater Vancouver real estate market. These compelling statistics clearly show how a significant increase in sales in the month of May can quickly influence the type of market we’re experiencing across the regions of Greater Vancouver. We are experiencing the lowest prices will fall in the lower and middle end of the market. There are still opportunities for buyers but they will likely diminish over the next couple of months.
Over the past couple of years, government at all levels have done their best to squash the demand for homes through policy and taxation. Unfortunately, little has been done to address supply. I’m watching first hand as developers put their foot on the brakes with land acquisition, and are cancelling or postponing projects that should have been in the pipeline for this year. Remember, the land a developer purchases today won’t be a finished condo, townhouse or detached home for at least 2-4 years based on rezoning, permitting and construction timelines. 2019 new home starts are down considerably over the previous 3 years. Net migration to Vancouver remains around 40,000 people annually. We will experience another supply crisis within the next 5 years.
As I spend time working with buyers and sellers, I am seeing an increase in activity. The listings I currently have are having more visitors to the open houses and showing requests. The properties I visit with buyers are selling faster, and multiple offers are becoming more commonplace. The last Yaletown condo purchase a buyer of mine made was in competition with 7 other offers. The mortgage brokers I work with have commented that the most recent rate drops have resulted in a significant uptick in pre-approvals.
Here is my forecast. The market will not bounce back to the runaway train levels we experienced a couple years ago. However, I’m confident we have hit the bottom of this correction in the low and middle range of the market (below $1,500,000). In this sector over the next 3-4 months, prices will stabilize and in some instances start to increase again. Buyer activity will escalate as those who have been on the sidelines for the better part of a year become active again. As the low and middle range become more robust, eventually we will see it begin to affect the higher-end product too. For those considering purchasing, act soon. Conditions will yet again begin to favor sellers in the near future.
I’d love to hear your comments or questions, so please don’t hesitate to reach out!