So are we ‘world class’ yet?
Despite not making it onto lists of the worlds most economically powerful cities, Vancouver is finally being compared to London, Stockholm & New York and we come out on top!
Swiss bank UBS has named Vancouver the city with the worlds riskiest housing bubble:
UBS said Vancouver prices were unaffected by the financial crisis in 2008 and continue to rise despite weakening commodity prices.
“Over the last two years, the housing market has gone into overdrive due to strong demand for local properties among foreign investors and a loose monetary policy,” the report said.
“Currently, house prices in Vancouver seem clearly out of step with economic fundamentals, and are in bubble risk territory.”
Hot on the heels of Vancouver are London and the Swedish capital, Stockholm. The report stated that, with the exception of Milan, low interest rates in the euro zone have pushed all the European cities reviewed into bubble territory.
Read the full article over at CNBC.
There seems to be a shift if then Vancouver real estate market lately and that has some people excited about a potential return to sanity, but we’ve seen versions of this story before. BearVancouverite shares some thoughts on why they remain ‘cautiously optimistic’ and a question about the future:
Some posters here are counting their chickens before they hatch. I’m with Ulsterman in being cautiously optimistic.
We all need some perspective here:
1) Total inventory is still below 10k. In previous years even 15k+ inventory saw a mostly sellers market.
2) The superb chart that Brian Ripley posted shows that the purple dots are leveling off, at an absorption level ABOVE 2015 and 2014 still. I hope this continues to drop.
3) News reports show that condos are still selling at a decent pace
4) Even a 50% drop in Summer 2016 listing prices only resets prices to maybe 2013 levels. Most houses I see listed in Killarney for instance are as of yesterday listing for $2.2-2.8M. Going down from there to $1.1-1.4M is still above what almost every bear here was willing to pay in 2010.
Here’s my question, and I honestly want to know because I’m trying to figure out at what point I should seriously consider buying. If there’s a 50% drop, and a Killarney 120 year old near teardown is selling for $1.2M, how many of the prominent bears here (including vangrl, yvr, Hamster, BPOM, LS in Arbutus, and UBC in crisis) would recommend a friend to buy at that point?
Btw as a counterpoint to my above caution, here’s my personal observations:
1) I’m seeing a lot of Killarney listings SFH come up now. Far more than I noticed throughout summer.
2) In general I’m seeing more 3BR+ listings per day than during summer, although there’s still very little coming up.
3) I’m seeing a lot of higher quality SFH being listed. Eg not just teardowns
4) Some of the listings I see have descriptions which include the realtor saying “lived in by long term owner” or “for sale by original owner” or “owner of 40 years” etc. So just observationally some of the inventory coming online is from locals finally willing to sell.
Paul Boenisch has been posting daily market updates here consistently for years. This gives us an interesting day by day view of the market.
Autumn means more listings, so far sales have to catch up.
Yesterday Pauls numbers show 307 new listings and 68 sold with a total inventory of 9728.
Perhaps someone can inform us as to where this graph originated- both Newcomer and YVR posted this in yesterdays comments.
This is an inflation adjusted chart showing average peak detached house prices and where prices would have to go to match a couple of different historical price collapses in Vancouver:
The original image is posted here on cloudup.
yvr2zrh wrote a good summary of what the market looks like currently, how media headlines can get it wrong and where we might go from here:
With about 9 market days remaining in the month, we can start to look forward to how the month will end up. During the past two weeks, we have seen so many numbers in the media which highlights not only is the market falling but also that the intricacies of the underlying data are not well-understood by so many people.
The message (although correct in that the market is bad) is so poorly explained and supported and thus the true state of the market is not clear to people. So – here is the summary of what is really happening.
1.) Sales volumes will be down around 25% for unit sales but 33% for dollar volume. My model predicts a 10% decrease in condo sales (which is not much).
2.) The decrease in average price across the entire market is driven primarily by mix at this stage. It is not known how much is driven by actual price movement. Likely little so far.
3. ) Detached home sales are down significantly. This is likely more than a 50% decrease from July volumes and could be more than 65% down from August 2015.
4.) It is not clear what the benchmark price will do but we would expect that the condo price is probably almost unchanged. This market is mainly suffering from supply issues which will take time to resolve. Detached benchmarks are likely to fall in the higher-priced markets. The reason is that there will be buyers but only low-ball buyers testing sellers.
5.) The stats will be partially supported by the month-end date cutoff issues at REBGV. They report sales based on the date they get paperwork. Many of the sales recorded to beat the tax will actually show as an August sale, while they are actually July sales. Since these are from a period with a “different regulatory and tax framework” they are not really comparable and should perhaps be shown separately for accuracy purposes.
6.) Inventory will be up a bit but we still have a supply shortage in condos. Detached house MOI will increase to 10 or more.
Ultimately, this tax is taking money out at the top. It will take a couple months to see how it all plays out but the top of the market will now need to rely on move-up buyers and bona fide immigrants who are permanent residents.
We can already see the headlines coming but some of the intricacies of the stats will not really be understood.
I also have some stories from the front lines which I will get more info on next month and then write a more detailed update.
And – let’s try to keep the discussion on topic as much as possible – we have started to waiver a bit in the past few weeks.
Posted by yvr2zrh on Friday August 19th 2016 in the comments section.