The Real Estate Board of Greater Vancouver (REBGV) released its stats package for February and, as expected, it showed significant price and sales strength in February. Press package can be found here, also redistributed here.
Long-time real estate blogger (and owner) mohican makes note of a so-called “bifurcation” of the provincial market, noting flat to lower prices in the Fraser Valley, Chilliwack, Okanagan, Northern Interior, etc. Househuntvictoria describes Victoria’s February market as “frothy”, though prices in the region are down from their mid-2010 peak.
As for Vancouver (REBGV, which includes Sunshine Coast and Sea to Ski corridor), the following information is noted:
- Vancouver West and Richmond, as reported as it happened by various online and mainstream media sources, showed significant sales and price strength.
- Detached increased in price faster than attached/condo
- Most areas, save Whistler and a few low-volume areas prone to more month-to-month variance, showed sales increases over February 2010
It helps to remember that real people are buying properties — in Vancouver in February in near-record numbers at record prices — and it’s worth asking exactly who is buying, why now, and how. Fish10 recently opined on a few ideas including the usual suspects: rich foreigners, black market activity, commodities, and an increase of investment scams perpetrated by locals. Here is a subset of some rationales for the market’s strength:
Foreign income. Simply this is the “Hot Asian Money” AKA “HAM” conjecture, that significant amounts of foreign capital are entering the province and causing ripples of cash to propagate in the local economy. (Remember all areas in the suburbs of Vancouver have shown price strength, not just areas with large immigrant activity, though this effect seems to diminish with distance from the city centre.) It need not necessarily take significant foreign income to drive prices higher, merely the belief there is foreign income to drive prices higher. Given the time to complete transactions and given those I know of personally involved in purchasing property in the current market, it’s not all foreigners buying.
Small uptick in mortgage rates. 3 month lockdown of low rates is soon coming to an end. A 0.5% increase in rates is about a 7% increase in monthly payments at current 5 year fixed rates of around 4%.
March 18th 35 year amortization CMHC mortgage insurance moratorium. If enough buyers are highly leveraged (greater than 5:1), the desire to get into a 35 year amortization term may be bringing forward some sales. The maths indicate a change from 35 to 30 years amortization is about a 7% increase in monthly payments. (February detached benchmark price was only up about 3.5% month-over-month…)
Pricedoutitis. If properties in desirable locales are truly “detached” from incomes, it may simply be another round of buying now before being forced to look in significantly less desirable areas. This may go to explain the urgency with which certain properties and neighbourhoods are moving, while others (even certain props embedded in the “hot” areas) linger.
Raw speculation. This can be construed as a symptom for local economic weakness: nobody has anything better to do but flip real estate. Turnover of certain properties seems short and the margins high, though it may just be these types of transactions are more a meme in the media, not that they are occurring with greater frequency. Builders may also be at play more recently than before. See “foreign income” as a reason why.
There are lots of other reasons of course, including simple banal randomness. In the end, does it really matter? The excuses given for market strengths and weaknesses are often symptoms rather than root causes. Nobody likes to hear they’re dumb. Just kidding. You’re not dumb.