Vancouver Price Drop Shopping Spree!!
Yep, Vancouver house prices are dropping. The REBGV benchmark price is down about 4 percent since May 2008. I guess that means we only need another few percent to meet ‘equilibrium’ according to this recent Sauder study on overpriced Canadian real estate.
Interestingly enough that Sauder study compares asking rents from Craigslist, so another option to reach ‘equilibrium’ would be just to post a bunch of much higher asking rents on Craigslist. That way we wouldn’t have to deal with the indignity of dropping house prices.
In the meanwhile, potential first time home buyers watch prices drop and hope for affordability.
Got a better idea of what you could buy with that money? Leave a comment below!
(1 votes, average: 5.00 out of 5)
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September 8th, 2008 at 11:35 pm
September 8th, 2008 at 11:46 pm
A simple cap-rate analysis would tell you that Vancouver’s real estate market is over valued by 30% to 50% depending on location and type (single family, multi-family, downtown condo, etc.).
Here is the link to his study. http://cuer.sauder.ubc.ca/down.....ercost.pdf
Let’s use the West side of Vancouver as an example as you just can’t look at the Greater Vancouver average. $1.5MM homes there rent for $2,500 to $3,500 and they are in dismal states. Might cover half of interest and other costs - if you’re lucky. I pay $2,200/month for my Coal Harbour apartment. Would have cost me close to $1MM to buy at the peak. I calculate it provides a 2.3% cap rate. The rent I pay does not even cover half the interest expense+property taxes+maintenance fees/capex. To be cash flow neutral - it would have to drop below $500K (still under a 5% cap rate)…and that’s at 6% interest rates….what happens it that goes to 7% or 8%? Rents can only go so high. Short and simple - prices are coming down in a material way.
The Vancouver Sun is a disgrace as a news source when it comes to Vancouver real estate. God forbid they lose all the revenues from the West Coast Homes section and all the other advertising from developers and Bob Rennie and the like.
I have been saying for the last few years that we will look back at this in the same way we did after the tech bubble. That one never made sense to me either. Buy an asset or a stock that is cash flow negative and pays no dividends. The only way to make a return is to find someone foolish enough to pay you more that you paid for it. Problem is that someone is going to be left standing in this game of musical chairs and that time is now. If you divide the purchase price by the annual net rental income - that number comes to a ~40x multiple in Vancouver. How many companies trade at those types of multiples? Only supercharged growth technology or biotech companies with proprietary technologies that are defendable. Real estate is a simple asset….the market can bear a certain amount of rent that grows by 2 to 4% a year. Build a cash flow model…it’s not rocket science.
I predict a 30% to 40% drop by 2012 followed by a period similar to 1992 to 2002…stagnant for a long time.
September 8th, 2008 at 11:52 pm
September 9th, 2008 at 12:28 am
September 9th, 2008 at 1:24 am
We’ve gone down over 4% since May at an ever increasing rate. With dire economic global forecasts for the next few years, and the likelyhood of increasing mortgage rates. You think it will take THAT long (until 2012) to reach 40% below peak? I suspect we’ll be there by 2011.
September 9th, 2008 at 2:00 am
September 9th, 2008 at 6:48 am
Ok at what point does Pastrick stop embarrassing himself?
Is the man a liar or plain stupid?
Remember this:
“Lower mortgage rates, a tight labour market, high income growth and rising in-migration all point to continued high sales volumes and price rises, according the CUCBC’s chief economist Helmut Pastrick.”
September 9th, 2008 at 7:23 am
Pope, you are golden.
September 9th, 2008 at 7:34 am
BTW Pope - I believe you used the benchmark price for all housing types not just detached homes. The GV Detached Benchmark was $737,985 in August, $753,165 in July, $765,654 in June, $771,250 in May, and $771,321 in April. This gives a total drop of $33,336 which is enough to buy a fully loaded Toyota Camry Hybrid if you like!
September 9th, 2008 at 7:38 am
Cap rates that are less than a government bond and negative cash flow properties cannot last in the long run…a 40% drop or more will be the only way to get us there. It’s coming to a theater near you and I agree with all of the comments on timing - it could be as early as early 2010 that we see these kind of drops.
September 9th, 2008 at 8:03 am
New song for the Ladies. “If I lost a million dollars”
September 9th, 2008 at 8:14 am
I’m just curious, what do you all do? No need to state specifics, maybe just the industry you’re in. I’m in general insurance.
I ask because many of you, sound very well versed in financials and it would be interesting to know your line of work.
September 9th, 2008 at 8:33 am
As for when we’ll see double-digit price drops, my bet is 2009 and continuing into 2011. It’s going to get bloody.
Much like the TSX, just slower…
September 9th, 2008 at 8:38 am
He bought years ago and could reap a huge profit, though I suspect he’s too late for a quick sale and will chase the market down. But the change in beliefs and attitudes is surprising.
Naturally, they don’t remember that they used to believe otherwise. Funny how that works.
September 9th, 2008 at 9:19 am
September 9th, 2008 at 9:27 am
September 9th, 2008 at 9:33 am
believe you used the benchmark price for all housing types not just detached homes.
Gar! After I’ve done all that work! As you can probably tell, Mohican is the financial professional and I’m the enthusiast who should work on his attention to detail. I guess a minor correction in the wording on the graphic will fix that, perhaps I’ll do one for detached houses next month.
This gives a total drop of $33,336 which is enough to buy a fully loaded Toyota Camry Hybrid if you like!
A more impressive total number to be sure.
September 9th, 2008 at 9:41 am
I smell a conspiracy!
September 9th, 2008 at 9:52 am
September 9th, 2008 at 9:58 am
There are two sides to that coin. We can state the drop in the number of months of “free rent” that you would have received if you applied the savings of not owning at peak towards renting. If the GV benchmark SFH that costs $734K rents for, say, $2700 to rent, then you’d have something like 16 months free rent already.
September 9th, 2008 at 10:02 am
I have a question.
Looking at the stats it is obvious that the selling prices are falling.
When is this going to translate into lower asking prices?
I check the MLS regularly and there are no more sub $400K SFHs listed than there were months ago.
September 9th, 2008 at 10:29 am
I’m glad to see we can now afford all these things with all the money we, and pretty much everyone else, really never had in the first place.
September 9th, 2008 at 10:31 am
I agree with Rob Chipman that it will be either a Tuesday or a Thursday.
September 9th, 2008 at 10:33 am
September 9th, 2008 at 10:42 am
Already has, but substantial drops won’t happen till ‘09 as sellers are now telling themselves current drops are an anomaly which will be corrected next spring. By mid ‘09, when sellers realize that spring sales were a dud and it’s really over, then you’ll see panic prices.
September 9th, 2008 at 10:45 am
http://www.tradepoint.ca/Regul.....goryId=600
Haven’t you always wanted a monkey?
September 9th, 2008 at 11:14 am
Hi, krrish!
On an unrelated note, there are still fools out there. II have a friend who KNOWING the market is falling is STILL planning on taking out a HELOC. “Did you know that’s how everyone does it in Vancouver?” he asked.
I’ve given up trying to explain that losing money on TWO assets is far worse then losing money on just one. Some people just believe everything they hear. There’s a koolaid drinker born every minute, I guess…..
September 9th, 2008 at 11:33 am
Reality is reflected in the average prices reported by the same organization. The average price of SFH is down 10% or about $100,000 since the peak price in February 2008.
September 9th, 2008 at 11:36 am
When people decide they really want to or need to sell, in the meanwhile the only stuff selling is going for below asking price. We’re only a few months past the peak, you can’t expect people to have given up hope on the market miracle yet. Look at the US, it took at least a year for asking prices to drop significantly, even two years into their bust there were experts saying that it was turning around any moment.. hasn’t panned out so well yet, other than for ‘board-up specialists‘.
September 9th, 2008 at 11:37 am
you were trying to compare a house vs appartment do you even know how many levels and bedrooms,bathrooms in one house? Do you even know how many families can fit in appartment or house?do you even know how much rent for appartment vs house?Do you even know that west vancouver is up 7.70% from last month. West Vancouver July 2008 $1,409,522 Aug 2008 $1,512,967 up 7.70%
This is how a house looks like $6800 / 6br - Large 6 Bedroom House Beautiful home ,It’s a 53′x120′ total of 6 bedrooms, 5 bathrooms, and a theater/recreation room. New appliances were installed this year and new landscaping performed in 2007.while smart buyers and fool sellers will be countinue most of shoping spree are availabe in port moddy area only because there was extreme acceleration in prices but anywhere else specially in Vancouver price acceleration was gradually up.
September 9th, 2008 at 11:40 am
“I’m just curious, what do you all do?”
Graphic arts, 3d Animation and Software Development.
You may have seen some of my stuff on TV if you watch a lot of kids shows. Especially on YTV.
September 9th, 2008 at 11:48 am
Wrong. The average is not only affected by sales mix but skewed by price. In California the low end dropped off first, meaning the average lagged the Case-Shiller index (which is not affected by sales mix or price skew) considerably for over a year. Here, it seems the high end has gone dead first, which means the average is falling faster.
The REBGV benchmarks are not perfect but they are the only apples-to-apples indexes we have.
September 9th, 2008 at 11:59 am
anybody notice the TSX is down 370 points and Dow is down 180. and this is after the GOv’t bailout FAN/FRE potentially costing the taxpayer 200 billion. anybody want to buy an US Dollar?
I wonder how this is going to affect CANADA…Toronto, Calgary, BC?
September 9th, 2008 at 12:14 pm
Welcome to the jork of length land where googly take over spin every day.How ever still in love crushed lil’bit on brittania bread.
September 9th, 2008 at 12:25 pm
The Market is Going DOWN FOR DECADES TO COME and anyone with half a brain saw this coming years ago.
September 9th, 2008 at 1:19 pm
v732147: 179+ days since originally listed, started at 635,000, dropped to 609900 in May, re-listed 594900 in June now re-listed at 638000
v726086: 120 days, listed at 619000 re-listed at 639900 in August
v727488: 179+ days, listed at 899000, dropped to 879000 in March, 859000 in April, 829000 in May, 799000 in June, then re-listed at 869000 in August???
v731538: 119 days, listed at 2998000, dropped to 2798000 in July, re-listed back at 2998000
v730890: 243+ days, listed at 1498000, disappeared for a while and re-listed at 1568000 (maybe this one sold and the flipper is just trying to get their RE fees back)
September 9th, 2008 at 1:20 pm
There hockey welcome to land jork which the length accepts revolves every day. Liked still crushing in brittania bread lil’ Position.
Great fun!
September 9th, 2008 at 2:05 pm
“Do you even know that west vancouver is up 7.70% from last month. West Vancouver July 2008 $1,409,522 Aug 2008 $1,512,967 up 7.70%”
Where can I find these reports?
September 9th, 2008 at 2:19 pm
Sept 1-8 REBGV SFH+TH+APT
Gross Sales 172,897,674
Units Listed 1,337
Units Sold 334
Sale Success Ratio 38%
% Sales to Listings 24%
Avg Price/Unit 517,657 (-11%)
Active Listings 19,526 (+60%)
Sept 2007 REBGV SFH+TH+APT
Gross Sales 1,660,872,647
Units Listed 4,990
Units Sold 2,852
Sale Success Ratio 65%
% Sales to Listings 57%
Avg Price/Unit 582,353
Active Listings 12,178
September 9th, 2008 at 2:21 pm
August 2008 REBGV SFH+TH+APT
Gross Sales 897,510,715
Units Listed 4,589
Units Sold 1,611
Sale Success Ratio 27%
% Sales to Listings 35%
Avg Price/Unit 557,114
Active Listings 19,067
September 9th, 2008 at 2:42 pm
you can log onto rebgv.com click on the realty link then click on latest release then click on aug hpi then click on july hpi or click here for august http://www.realtylink.org/hpi/.....YPE=buyers and here for july http://www.realtylink.org/hpi/.....YPE=buyers
September 9th, 2008 at 2:51 pm
wolfey - crazy day huh? Looks like TSX tanked 487pts by the end of the day. Oddly, the greenback has been bullish last couple months. Some analysts were expecting it to remain this way for a couple more quarters.
September 9th, 2008 at 4:32 pm
(especially those with no down payment)
1) Rent (especially if you can find an afforable place)
2) Co-Ops (i.e. a life never owning a property)
3) Try and wait for the market to crash?
4) a crazier idea like rent-to-own
5) or move?
Are there any hope for those people stuck out of the Vancouver realestate market because they were born too late and don’t want to live in the boonies?
September 9th, 2008 at 4:43 pm
http://video.google.com/google.....&hl=en
“The falling house prices is really why this had to happen now…” “… mortgage revenues were insufficient to fund these companies.”
September 9th, 2008 at 5:24 pm
Rent for now, 99% chance of a big market crash. You should be able to buy something in 3 years or so. (Hopefully less)
September 9th, 2008 at 5:41 pm
September 9th, 2008 at 5:56 pm
http://www.faithwilson.com/showProperty.php?p=316
September 9th, 2008 at 6:02 pm
September 9th, 2008 at 7:31 pm
1) Yes, just take the time to find the right place and you will be happy while the market crashes.
2) Some love it, some run far far away. As you suggest, its especially for those who aren’t interested in the housing market or need the space to raise a family (lots of other kids in some co-ops). There are no new co-ops and they are often like leaky condos (health issues).
3) Yes.
4) No.
5) I’ve considered this too. Just keep in mind the fewer job prospects in smaller places.
September 9th, 2008 at 7:54 pm
Rent-to-own opportunities started mushrooming in the US a couple of years ago and are one of the early signs of an impending RE bust.
It’s quite simple really. You pay an above-market price for a rental, which gives you an option to buy it for an above-market price.
Is that a deal or what? For the owner it is.
September 9th, 2008 at 7:55 pm
September 9th, 2008 at 8:04 pm
September 9th, 2008 at 9:07 pm
tsx venture mkt cap c$52 Billion = down 50% from its high 3 months ago
C$ 326,000,000,000 ….. poof
oil is going to 250 … grain/corn fertilizers never going down rich asians need them … oh and they love gold and our real estate
when is the “its different this time” going to show up … oh yeah Dave real estate will only go down maybe 5%
September 9th, 2008 at 9:28 pm
September 9th, 2008 at 11:09 pm
September 10th, 2008 at 12:24 am
September 10th, 2008 at 2:33 am
Cheaper oil
September 10th, 2008 at 6:59 am
yes, with the government buyout of Freddie and Fannie, there is some renewed consumer confidence. This is all that is required to push the dollar back up a few points. The US gov’t will probably have to print more money as well to counteract the buyout.
September 10th, 2008 at 7:18 am
….. said the UBC study provides a “misleading” picture of the local real estate market.
……..
“You’d think these (UBC) guys would be a little smarter than that,” he added.
finger pointing 101
September 10th, 2008 at 8:16 am
The lady doth protest too much, methinks. Somerville is likely closer to the mark with Regina than he is with Vancouver. It sounds like Realtors have confidence the buyers of Regina will prove Somerville wrong in time. They’re probably right, though not in the way they would like.