Vancouver housing prices continue to decline, throwing cold water on the speculative buying activity of recent years.
The days of rampant flipping are over and industry specialists predict the market to further decline before plateauing, and then slowly rise again, but not with the same frenzy of the past three or four years.
“My prediction is we are going to see prices end up at the 2015 and 2016 range, without the infusion of Chinese money and all the speculators, coupled with the [new] speculation tax, empty homes tax and a 20-percent foreign buyer’s tax,” says Vancouver realtor Ian Watt, who provided The Globe and Mail with several recent examples of price drops. “Prices will continue to fall for another 48 months or more, especially for real estate over $2-million.”
That’s because the buyers in that price range just aren’t there, he says.
“Vancouver was overdue for a reality check, and thanks to the perfect storm, it’s here. It’s going down fast and people are so stubborn they won’t admit it’s dropping.”
Realtor Layla Yang, who has offices on the west side of the city as well as Richmond, B.C., says she just sold a house in the Arbutus area for $1-million less than the asking price. The home at 2569 West 22nd Ave. spent 98 days on the market with a listing price of $5.75-million. It sold on Feb. 25 for $4.75-million.
She says it’s a good time to buy a $5-million house because that same house used to be valued at $7-million.
“It’s the dream home you can now afford,” she says. “Some clients will say, ‘I will wait till it’s even lower.’ But now is the lowest, and I’m talking about Vancouver west side. This is the time to buy. Why wait for 10 years later? You work hard, and a home is everything.”
Although houses are seeing the biggest drops, there are drops in the condo market, too. The condo building at 1033 Marinaside Cres., in expensive Yaletown has long been in demand with its waterfront views, offering the best location that Vancouver has to offer. A 1,293-square-foot, two-bedroom unit on the 11th floor, fully renovated, sold last April for $2.355-million. A same-size three-bedroom unit, on the 29th floor in similar shape sold in February for $1.9-million.
A 620-sq.-ft. one-bedroom unit downtown at 938 Smithe St., on the 14th floor sold for $818,000 in January, 2018. A same size one-bedroom on the 19th floor in the same building sold 11 months later for $650,000.
A three-bedroom, 1,546-sq.-ft. condo at 638 Beach Cres. in Yaletown, completely renovated, sold for $2.234-million in January, 2019. One month later, a same size three-bedroom unit one floor above sold for $2.065-million.
Detached houses have dropped much further, particularly in West Vancouver, Richmond and the west side of Vancouver, where the inflow of foreign money has dropped off.
Ms. Yang says many of her clients are investors from China and it’s become difficult to transfer money into Canada because of new Chinese controls on the flight of capital. As well, the province’s new 20-per-cent foreign-buyers tax, among other new taxes, is putting them off.
“If we talk about the luxury market, which I am frequently in, I find most of my buyers are immigrants from China. And right now it is very hard for them to wire the money to Canada, according to my clients, and I’ve heard that from other realtor friends, too. That’s the No. 1 reason.
“And a lot of taxes are really affecting the way they buy,” she says, citing taxes as the “No. 2 reason” her clients aren’t buying like they used to.
“In the past, they buy one [house] and then buy a second one, but right now they face the empty-homes taxes. For them, that’s kind of a headache because they have to find a tenant. Sometimes they just want a vacation home, whatever.
“I have one of my clients, her house is over $4-million, and the tenant that won’t bring her trouble is paying $1,000 for rent, in the Point Grey area.”
Ms. Yang cites the new Speculation and Vacancy Tax as a deterrent for her clients, which is 2 per cent for foreign buyers and satellite families. On a $6-million home, she says, that is a lot of money for an investment property. She has clients that are satellite families who are renting out their basements.
She emphasizes that she is not saying that people from China are no longer looking to Vancouver for investment, but the market has definitely slowed. And investors are looking to other jurisdictions, she says.
“We are talking about big, big numbers. … You give them too much restriction,” she says of the government’s new policy aimed at curtailing foreign buying. “It’s definitely not helping to sell, that’s for sure.”
A large, brand new luxury house, with a putting green, at 5611 Cathay Rd. in Richmond had been purchased in 2015 for $2.58-million. It was put back on the market only one year later, at $4.38-million – but didn’t sell. The owner listed it again in 2017 for $3.798-million, without luck. It was relisted in January, 2018 for the same price, but no buyer was found. They reduced the price and relisted the house in August, 2018 at $2.98-million, and it finally sold in February, 2019 at $2.522-million.
The owners sold the house for less than they’d purchased it four years ago and 14 per cent under assessed value.
On the west side of the city, at 2149 W. 35th Avenue, in Quilchena, someone bought the character house on a large 66-foot-by-130-foot lot in 2014 for $3.15-million. It was listed several times in 2018, as high as $5.188-million. It finally sold in February this year for $2.88-million – lower than the purchase price five years ago, and $1-million less than the assessed value.
Again, there are many examples. Mr. Watt says it’s a bigger drop than the market saw in 2008 and 2009, with the worldwide economic downturn that only grazed the Vancouver market, causing a minor setback.
“The only reason Vancouver took off is because of Chinese money and speculation,” Mr. Watt says. “And a lot of people bought in the last few years expecting to make two, three, four hundred thousand. But now they are losing two, three, four hundred thousand. And they just can’t comprehend it, because Vancouver has never had a loss like this.
“In 2008 people weren’t flipping places to the extent they are now … people are so highly leveraged, because they bought cars, they bought this, they bought that. Now, people will tumble. We are going to see huge changes in Vancouver like we’ve never seen before.”
A big part of the reason is that investors have backed away. Real estate marketing and analysis company MLA released a recent report based on that shows a huge spike in investors in Brentwood and Metrotown concrete high-rises between 2010 and 2018. From 2010 to 2012, 89 per cent of property purchasers planned to live in the homes. But between 2016 and 2018, that number dropped to 33 per cent. The vast majority of buyers were investors.
Cameron McNeill, executive director of MLA, says the pendulum is now swinging the other way, with the bulk of buyers planning to live in their homes again. His company forecasts the split between investor and end user to get closer to 50/50. End-users will “chase affordability” in the region, while investors will wait because of market fluctuations, capital restraints and the government’s new registry for assignment of presale condo sales, which have not been a matter of public record. The unique registry was launched last week, and is expected to track those people who flip presale condos before construction is complete. The purchaser name and sale price of those assignments will be shared with the Canada Revenue Agency to help thwart any attempt to evade taxes. But Mr. McNeill says presale prices will stay strong because there will be continued pressure to produce more supply as people come to B.C. for jobs.
He sees prices levelling out and then slowly rising again in 2020. However, he doesn’t see developers cutting prices on presales. At the Oakridge Centre’s 42-storey Piero Lissoni Tower, price per square foot for a presale unit is between $2,100 and $3,500, according to an Oakridge sales agent. The tower is one of a pair, named after interior designers. A one-bedroom unit starts at $1.3-million, a two-bedroom unit starts at $2-million and a three-bedroom unit starts at $3-million. Sales started last November, and are part of a massive redevelopment that includes 2,000 market condos, 290 market rental units and 290 city-owned rental units.
Mr. McNeill says developers would rather hold than offload units at reduced rates.
“The real estate industry cannot afford to deliver housing much below the current offered pricing,” Mr. McNeill says. “Land prices, construction costs, city and provincial fees and taxes establish a baseline price that real estate developments simply can’t go below. Therefore, if market prices do not support the required pricing, the developers will simply wait and not bring those projects forward.”
But that doesn’t mean that developers aren’t trying to sweeten the deal.
“Developers and sellers are offering many incentives to buyers like huge reductions off asking prices, free renovation upgrades, free strata fees, et cetera,” long-time west side realtor Bryan Yan says. “And for buyers’ agents they are offering bonuses from several thousand to tens of thousands on top of the commission. It’s a sign of the current market situation.”
Mr. Yan says that year-to-date as of March 1, 2019, only 11.18 per cent of west side houses sold. That’s 73 sold out of 653 listings, and the majority were in the $1-million to $3-million range. Some pricier houses have been discounted by 25 per cent of their assessed value, Mr. Yan says. But most west side homes are selling for about five to 15 per cent below assessed value, he says.
“The higher the price, the bigger the drop,” Mr. Yan says.
As for those who planned to flip a property in dreams of making a profit, they would do well to follow some time-honoured real estate advice.
“Purchasing with a five-year timeline and not thinking about making a quick buck should always be top-of-mind when buying,” Mr. McNeill says.
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