What’s happened to condo prices?

With all the media focus on rising real estate prices in Vancouver you’d think all market segments must be doing pretty well right?

Well it sure looks like condo prices have been languishing.  First we had the CIBC world markets report showing Vancouver condo prices barely budging in the last five years, and now Ulsterman points out the following:

It’s easy to only see the big gains SFH’s have made over the past 5 years and overlook the many “homeowners” of condos who have not made much or even lost money (what!?!, but i was told it only goes…).

I noticed 303-1333 W 7th Ave (V1088944) listed in the Georgia Straight p72 of Nov 20-27 issue). It’s a 1bd/1bath unit listed for $355,000. The key detail was of course, “Amazing deal, listed $20,000 below where it sold in 2009.”

So after paying $70k in interest, $15k’ish in taxes and strata fees, $20k capital loss, CMHC fee when buying (10k) (3%?), $13k selling fees. This gets expensive really fast ($128,000 over 5 years or $2133/month). It probably rents for $1300/month.

Not such a slam dunk.

Are condos just hitting a price ceiling at the entry level? Shouldn’t condo prices be going up more in this market?

Joe Mainlander points out that the REBGV HPI paints a similar picture.

Even the REBGV HPI stats point to a sinking condo market (not 20% though);

Metro Van Apartment HPI;

July 2008 = $367k
July 2014 = $380k

There’s been 10% inflation since then, so HPI would need to be $403k just to keep up.

A 6% drop in real dollars.

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Mister Obvious
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Mister Obvious

For a great barometer of the health of the condo market go take another look at “sixth & steel”. Empty, ugly and unloved. It’s getting so I’ll have to plan another route across the city. Its too depressing to drive by that ridiculous sign plastered across those rusting steel bars.

crabman
Guest
crabman

It seems pretty clear that entry-level condos are going nowhere, while high-end condos and SFHs are up quite a bit the last few years.

And the fact the fastest appreciating properties are above $1M — meaning no CMHC insurance — means it’s time to stop blaming CMHC for the Vancouver market. They certainly played a huge role in the earlier phase of this bubble, but now foreign money is the clear driver.

Wow
Guest
Wow

S&P hitting another record. 2070!

Apple is now worth $780 Billion.

Like I said, the world is awash in money.

Wow
Guest
Wow

SFD are limited in supply.

Condos are not. These are meant for local buyers with no savings. Same with townhouses.

SFD will be for foreign buyers, high income locals such as Dentists, and for people who bought SFD 10+ years ago.

If you are not in this group, I’m sorry but prices are not coming down. Even a 30% crash will still have million dollar entry sfd homes.

patriotz
Member

@2:

Someone sells their current propery for (say) $750K, buys a new property for $1.1mil. They don’t need CMHC insurance for their purchase, but it’s likely the buyer of their old property (or the buyer of the buyer’s old property) did. This is not conjecture, we discussed an article in the G&M about such a purchase.

RE markets are supported by the bottom and the bottom remains supported by CMHC.

Now if you’re talking $2mil+, I think you’re more on target as I think that’s out of the trade up range.

Boombust
Guest
Boombust

There is a condo glut.

More and more developers are coming up with “incentives” to move their product; particularly here in the Tri-Cities area.

crabman
Guest
crabman

@5

I agree that in a normal market, it’s the entry-level buyer that drives the market. But when that is the case, prices at the low-end go up faster than prices at the high-end. There is very little foreign buying in San Diego, and look how much faster condos are going up:

http://piggington.com/

And if you look at which SFHs appreciated the most during the San Diego bubble, it was the low-end homes:

http://voiceofsandiego.org/wp-content/uploads/app/storyart/dec_2012_case_shiller-5.jpg

IMO, the Vancouver market is no longer being driven by locals borrowing huge sums of cheap money. If it was, condos would be going up faster than +$1M properties.

Wow
Guest
Wow

My posts getting voted down?

I thought everyone here had 6 or 7 figure portfolios. Shouldn’t you be cheering the market on?

Westside Realtor
Guest
Westside Realtor

There is a squeeze on the upper end of the SFH market going on currently as well.

Lower end squeezed, upper end soft…those in the middle will get the msg soon enough…i expect east van sfh market to soften next (just my guess).

Joe Mainlander
Guest
Joe Mainlander

In 2013 there were 2,505 homes sold for over $1 million, out of a total of 28,500 sales in the REBGV area. That’s less than 10% of sales. Not too many folks buying those +$1 million homes. The market is driven by the 90% of sales below $1mil. Definitely not the high end driving the market.

http://www.remonline.com/luxury-market-exceeds-expectations-sothebys/
http://www.rebgv.org/monthly-reports?month=December&year=2013

CMHC policies and historically unprecedented interest rates fed this Canada-wide bubble since the early 00’s, and the repercussions are still being felt in the wave of move up buyers. The wave can’t go on for ever. The flatlining of the condo market is just a sign of what is to come.

Slagathor
Guest
Slagathor

….Car loan debt bubble at risk….

But Realturds have been telling us that everyone wants to live downtown and the don’t what to own cars. Who’s buying all these cars? Oh yea, maybe they’re buying them to live in them (then they can park downtown).

crabman
Guest
crabman

@10:

You might think that 2,505 is a low number. But that is more $1M+ sales than there were in any US city over the past 12 months!

San Francisco – 2,485
Los Angeles – 2,170
New York – 2,145
San Jose — 1,119
Houston – 981
Chicago – 972
Naples, FL – 964
Miami – 933
San Diego – 927
Washington – 878

http://timesofsandiego.com/business/2014/10/01/led-la-jolla-san-diego-ranks-8th-luxury-home-sales/

Zero Down Forty
Guest
Zero Down Forty

It’s not the deep grey sea, magic mountains, asian hordes, or running out of land myths.

SF homes are just having there slow-motion “Wile E. Coyote” moment. They will soon find that there no firmament beneath.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

@Zero Down Forty

and then prices will go sideways for 5 years! look out homeowners! prices are about to get very stable!

Van Coffee
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Van Coffee

BBB @ 14.
Sometime you are just ON…..

Anyway, I don’t see any sign of a slow down in the last 12 months in my target area (Marpole). Outside of the areas that are being re-developed into multi-family in the area, I am seeing a TON of $2.0 million + new builds.

As much as I would like to see a slow down, it hasn’t materialized in the area that I watch.

kabloona
Member
kabloona
Don’t worry, housing is only “modestly over-valued” according to CMHC. 😉 https://ca.finance.yahoo.com/news/modest-amount-overvaluation-canadian-housing-markets-cmhc-says-173444312.html “Modest amount of overvaluation in Canadian housing markets: CMHC By The Canadian Press | The Canadian Press – 1 hour 2 minutes ago OTTAWA – The Canada Mortgage and Housing Corp. said there is a modest amount of overvaluation in the country’s housing markets, however other risk factors such was overheating, price acceleration, and overbuilding are not present. In its house price analysis and assessment Monday, CMHC said overall, Canadian housing markets are “broadly consistent with underlying demographic and economic factors such as employment and interest rates.” CMHC chief economist Bob Dugan said the risk of overvaluation is most evident in Montreal and Quebec, but added that the trend is improving. A modest risk of overvaluation is also present in Toronto, Calgary and Halifax, he said. “There is… Read more »
squeako
Guest
squeako
Re: “Joe Mainlander points out that the REBGV HPI paints a similar picture. Even the REBGV HPI stats point to a sinking condo market (not 20% though); Metro Van Apartment HPI; July 2008 = $367k July 2014 = $380k There’s been 10% inflation since then, so HPI would need to be $403k just to keep up. A 6% drop in real dollars.” I would like to add to this: how many people have received any raises during this time? I have a feeling very few and very little (below inflation). That is those that do honourable and taxpaying work, those that carry this society on their shoulders. My opinion is that you cannot work and buy a house in Vancouver, you can work elsewhere (ie Alberta, US, Ontario) and buy a house in Vancouver, but why? Or you can buy… Read more »
Brian Ripley
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Brian Ripley

Renting in Vancouver is still a good alternative to buying. There is little risk in building up one’s cash and investments while Vancouver real estate prices are at a standstill.

Strata prices in Vancouver have been range-bound for 7 years:

http://www.chpc.biz/vancouver-housing.html

hotnothot
Guest
hotnothot

BBB: are you predicting condo prices will go sideways for ANOTHER five years?

Wow
Guest
Wow

Apple right now has a market cap of $786,000,000,000.00 !!! Increase by $6,000,000,000 from a few hours ago.

And you think a $1,000,000 house is expensive?

There is too much money sloshing around in the world. Leads to inflated asset values for the long term. After all, you must store your wealth somewhere. Gold is out of favour of the wealthy hence you have other asset classes going up up up.

Joe Mainlander
Guest
Joe Mainlander

Re:#16 Kabloona.

In article CMHC says;
“”The number of units under construction is elevated in these centres. This could develop into overbuilding if these units are completed but not sold.”

The CMHC knows that developers can’t get financing to build unless the vast majority of units are pre-sold.
Methinks this is a little bit of manipulative propaganda to make it seem that the CMHC is warning the market. Then, lo and behold, units are all spoken for! Developers have listened! Prudence prevails! No bubble.

Mortgageslave
Guest
Mortgageslave

@WOW – we get the picture, “the world is awash in money”. How does your comparisson of stock prices to house prices work exactly?? Vancouver is overpriced and a BAD investment. Only Fools are investing in it and “a fool and his money are soon parted”. Quit with posting the same BS over and over again. Or at least tell us your point!

Mortgageslave
Guest
Mortgageslave

Apple makes HUGE profits. They’ve been growing each quarter, houses profits goes down as if it increases in value the rent stays the same. Simple logic that houses are getting a worse investment by the day…

Yunak
Guest
Yunak

@12

You might think that 2,505 is a low number. But that is more $1M+ sales than there were in any US city over the past 12 months!

As long as there is a steady stream of Chinese there is nothing to worry about RE prices. They can keep party going in Vancouver for another 100 years at least, given the shitload of people that China manage to produce and export.

crabman
Guest
crabman

@20:

The stock market is being driven by earnings growth. US corporate profits are up 25% from their pre-recession peak.

http://research.stlouisfed.org/fred2/series/A446RC1Q027SBEA

And Apple’s P/E is only 18.

http://www.nasdaq.com/symbol/aapl/pe-ratio

What fundamentals are driving Vancouver RE? What is the price-to-rent ratio for a SFH?

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