Lower housing sales in Vancouver have yet to translate into bargain buys at the entry level, despite headlines in recent months on the city’s real estate market cooling down, industry experts say.
Buying is no closer to being within reach for millennials because the market downturn has mostly hit detached houses while having only a relatively muted impact so far on pricing for entry-level condos and townhouses, said demographer Andy Yan, director of Simon Fraser University’s city program.
To make starter homes in Vancouver affordable, wages would have to skyrocket and/or condo prices would have to collapse, Mr. Yan said. “It could be a mix, of course – some version of doubling incomes or halving prices so that the market is realigned to local incomes,” he said in an interview on Tuesday.
Since mid-2014, condo prices in Vancouver have soared more than 50 per cent, even after factoring in a pricing drop in the first half of 2018.
It has been two years since the provincial government, then led by the B.C. Liberals, slapped a 15-per-cent tax on foreign buyers in the Vancouver region. In February, 2018, the B.C. NDP minority government raised that tax to 20 per cent and also expanded its reach to include other urban areas in British Columbia.
The implementation of the foreign-buyers tax in August, 2016, helped end the boom in detached housing, but prices for starter condos haven’t been deeply discounted during the lingering crisis over affordability, said Steve Saretsky, a real estate agent who also writes a housing newsletter.
Over the past two years, Vancouver condo prices jumped 13.9 per cent on average while townhouse prices rose 6.5 per cent, according to his analysis. The price for condos sold within Vancouver averaged $857,503 in June, compared with $753,065 in the same month in 2016, while the average price for townhouses climbed to $1,162,466 from $1,091,106 over the two-year period.
By contrast, the price for detached houses sold in Vancouver in June averaged $2,550,708, down 12 per cent from $2,899,698 in the same month in 2016.
Federally, a stress test imposed this year by Canada’s banking regulator has reduced the amount that borrowers qualify for and slowed demand for real estate. Total sales of various housing types have tumbled to multiyear lows in Vancouver as a result of the B.C. NDP government’s housing policies and the federal stress test, which combined have made it tougher on borrowers already coping with higher mortgage rates, Mr. Saretsky said.
“It’s still pretty hard to afford to buy, especially when there is a clampdown on mortgage financing,” he said. “If you have an expensive two-bedroom condo for sale in Vancouver, it’s going to sit longer on the market than an entry-level one-bedroom condo.”
The city’s condo market peaked in January this year and the townhouse segment hit new highs last August. The average price for attached properties sold in June was more than 15 per cent lower than the record highs.
Nevertheless, condo owner Cohen Landherr’s experience underlines the reality for young buyers in Vancouver – even with the slump in the first half of 2018, the market is still too pricey for millennials, unless they get help with down payments from parents.
Mr. Landherr listed his Vancouver condo in June in order to upgrade. The 29-year-old financial technology consultant hopes to make a decent profit on his one-bedroom unit in the Mount Pleasant neighbourhood on Vancouver’s east side. Selling would then allow Mr. Landherr to fulfill his quest to buy a larger place in Gastown, located closer to his downtown office.
“The housing market is insanely expensive in Vancouver. That’s the bottom line,” he said. “Our salaries don’t allow us to afford homes unless you come from a wealthy family that gives you financial help in the beginning.”
His parents helped him in 2014 with a large down payment on the presale condo that he agreed to buy for $326,000. He wants to sell the 615-square-foot unit for close to his current list price of $599,800, marked down from his original asking price in June of $648,000.
Mr. Landherr said he missed out on the pricing peak of Vancouver’s condo market in January, when he might have fetched at least $600,000 for his condo, located about four blocks east of Main Street. Still, assuming all goes well with selling, he reckons he will benefit from the increased value of his current condo and then buy a slightly larger unit for roughly $800,000 in Gastown.
Hani Lammam, executive vice-president at Cressey Development Group, said condo listings between $500,000 and $600,000 are considered desirable by first-time buyers, with that price range realistic on Vancouver’s east side or in the suburbs. “Anything under $500,000 has been selling like hotcakes, though that might mean an older condo on the east side,” Mr. Lammam said.
Brandan Price, an agent with Rennie & Associates Realty Ltd., said provincial and federal housing measures have primarily affected higher-end detached houses so far in Vancouver.
“For properties below $3-million, I’m not seeing sellers panic or buyers lose consumer confidence,” Mr. Price said. “But many buyers and sellers aren’t seeing eye-to-eye. A lot of sellers are in a strong financial position and they don’t have to sell and they will just stay put until they get a number that they like.”