Call it Exhibit A for the state of Vancouver’s slumping market for detached houses.
In a gauge for rundown properties, a buyer paid $1,980,000 last month for a three-bedroom teardown in the city’s Point Grey neighbourhood, nearly three years after the seller bought it for $2,880,000.
The listing took 14 months to sell, underscoring the sluggish sales activity across the region. Housing sales have tumbled to a 10-year low in Greater Vancouver as a market once fuelled by bidding wars gives way to a period of declining prices.
Last month’s 1,103 sales in the region for various housing types were the lowest for January since 2009, when only 762 properties changed hands in that month during the recession, the Real Estate Board of Greater Vancouver said on Monday.
Sales volume in January dropped 39.3 per cent when compared with the same month in 2018, and slumped 36.3 per cent beneath the 10-year average for January.
Simply put, the psychology swung last summer to being a buyer’s market, with consumer confidence eroded by an array of B.C. taxes on real estate, said Phil Moore, president of the Greater Vancouver board.
“Anything above $3-million has been hardest hit,” he said. “Buyers don’t like instability and they’re looking for homes that are liveable.”
Within the City of Vancouver, listings for detached houses for less than $1-million are no longer rare. “I’m surprised that we’re starting to see more and more detached sales in East Vancouver below $1-million and even a few sales on the west side under $2-million,” Mr. Moore said.
Provincially, the B.C. NDP government raised the foreign-buyers tax to 20 per cent one year ago, while expanding that tax beyond the initial target of the Vancouver region. Other provincial factors include what the NDP calls a speculation and vacancy tax targeted primarily at out-of-province residents, and other B.C. taxes aimed at higher-end properties.
Higher interest rates and toughened borrowing rules are other factors, housing experts say. Canada’s banking regulator implemented a stress test on Jan. 1, 2018, making it harder for buyers to qualify for mortgages.
The benchmark price (an industry representation of the typical home sold in an area) for all residential types in Greater Vancouver has declined for eight consecutive months, hitting $1,019,600 last month after setting a record high of $1,094,000 last May.
The benchmark price for detached houses has fallen 14.1 per cent over the past year on Vancouver’s west side to $3,049,700. The region’s condo segment began softening in mid-2018, including in the less-expensive suburbs. In New Westminster, for instance, the benchmark price for condos sold has fallen 8.5 per cent over the past six months to $524,400.
Look no further than the Vancouver teardown as a dramatic example of the turmoil in the detached segment. The listing in the Point Grey neighbourhood on the city’s west side went on the market for $3,070,000 in November, 2017. The house, built in 1912, languished for six months without any takers. Last May, the seller lowered the asking price in what would be the first of four markdowns.
Finally, after slashing the list price to $2,199,900 on Jan. 7, the knockdown sold days later for $900,000 lower than what the seller paid nearly three years earlier, or a 31-per-cent plunge. The seller had acquired the teardown for $2,880,000 in February, 2016. Six months later, the then-B.C. Liberal government introduced a 15-per-cent tax on foreign buyers in the Vancouver region.
In desirable neighbourhoods on Vancouver’s west side, rundown homes that fetched as much as $3-million during a red-hot market in mid-2016 would now sell for roughly $2-million to $2.3-million, reflecting land value only, housing observers say.
“We made a good deal,” said Gordon Ge, the agent who represented the Point Grey buyer. “The market is dropping down right now because of the extra taxes.”
Mr. Ge said his client plans to rent out the bungalow for a couple of years, before demolishing it and building a new house.
The listing agent, Danielle Lu, said she couldn’t say much about the transaction. “I am sorry that I can’t discuss anything about my client. It is their decision,” she said.
Still, the affordability crisis persists. Even with a buyer’s market, prices remain lofty compared with the 2000s. Records for Ms. Lu’s listing show that the property sold for $455,000 in 2002 and resold for $751,500 in 2005 – above the asking price in both instances.
Developers say there are examples on Vancouver’s west side and in the district municipality of West Vancouver of extreme price drops for detached properties, especially teardowns that are sold for land value. But they expect 2019’s bumpy ride will smooth out with improved sales activity in 2020 and an optimistic outlook over the long term.
“Builders need to have confidence that values are going to move up during the course of construction,” said Neil Chrystal, chief executive officer of Polygon Homes Ltd.
Eric Carlson, chief executive at Anthem Properties Group Ltd., said he expects sales volume for resale properties to be slow for another one or two quarters. For buyers considering entry-level condos, the thought of losing $50,000 in market value has been a deterrent, he said. “But they will get tired of sitting in basement suites or living with their parents or having roommates," Mr. Carlson said.