DATE

Steve Saretsky -

Canadian GDP Hits 4.5% In Q2 2017 Despite Drop In Residential Investment The Canadian economy accelerated at it’s fastest pace in nearly six years. GDP growth hit 4.5% in the second quarter of 2017, defying just about everyone’s expectations. Perhaps even more surprisingly was the large growth despite a significant drop off in residential investment which dropped 4.7%. Investment in residential structures also sunk 1.2%, which was largely due to a 6.7% drop in homeownership transfer costs as sales fall in Vancouver & Toronto. To no surprise household spending is up 4.6% as the ‘wealth effect’ from surging real estate prices continues to encourage more spending. Homeowners are drawing down equity at a record pace, as I wrote the other day, total Canadian loans secured against real estate is up 11% year over year. This phenomenon can also be seen in data from Capital Economics, which highlights a falling savings rate with an uptick in household consumption. Either way you slice the data, it supports the notion for further rate hikes. CIBC is now predicting that the Bank of Canada will increase interest rates another 0.25 basis points as early as next week. With the market currently putting it at

Steve Saretsky -

Loans Secured Against Canadian Real Estate Increases 11% Year over Year Our good friends over at Better Dwelling are reporting that Canadians Are Borrowing Against Real Estate At The Fastest Pace Ever. According to the report, which sites recent data from OSFI (Office of the Super Intendant of Financial Institutions), nearly $314 billion dollars was used against Real Estate to secure loans. This was good for an 11% increase year over year. Perhaps even more concerning was of the total $314 Billion, the vast majority of it was used for non- business related reasons. As of June 2017, $266 Billion was used to basically fund fancy new cars, boats, renovations and various other unproductive things. This is a 4.9% increase from the same month last year, or a $12.49 billion increase. Homeowner Refinancing Also Surging This follows a concerning trend where homes are being used as ATM machines. As I wrote recently, Vancouver homeowner refinancing is up 27% year over year, and a whopping 49% increase in Abbotsford & Mission. This follows a similar phenomenon where low credit-score homeowners in the United States between 2002-2006 borrowed an average of $0.40 for every $1 increase in home equity value. Which was rarely

Steve Saretsky -

TD Bank Releases Latest Data on Canadian Real Estate- Provides Optimistic Outlook TD Bank released their latest data on the Canadian Real estate markets and provided their outlook on what’s to come. To little surprise, TD Bank forecasts a soft landing equivalent to that of Captain Sully’s landing of American airlines flight 1549 on the Hudson River. Below are some of the highlights from the report. You can read the full version here. New OSFI Stress Test to Weaken Demand OSFI has proposed a stress test on all uninsured mortgages which is widely believed to be implemented this fall. TD estimates “this new rule could depress demand by 5% to 10%, and shave 2% to 4% off of our current forecast for the average price level in 2018.” Interprovincial Migration Has Peaked People migrating from other provinces such as Alberta, Saskatchewan, and Newfoundland into BC & Ontario has now peaked. This is likely due to rising housing costs and a lack of overall affordability. How will higher interest rates impact the market? After 7 years the Bank of Canada finally increased interest rates, and is expected to continue on that path. TD says Canadians have seen a 40 basis point

Steve Saretsky -

Province Approves 4% Allowable Rent Increase for 2018 Housing is about to get more expensive for renters in BC. This week the BC Government set the legally allowed rent increase at 4% for the upcoming year. Landlords will be able to increase monthly rents by up to 4% in 2018. For the record, Landlords can only increase the rent once in a 12 month period and must give the tenant’s three full month’s notice. You can calculate your rent increase here. Annual rent increases are determined by a formula set by provincial regulation and is tied to the annual rate of inflation (inflation rate + 2%). This is the largest rent increase for British Columbian’s since 2012, and the second largest increase over the past decade.  According to Padmapper, Vancouver rents are still the highest in Canada. As per their July 2017 data, the median rent price for a one bedroom is $1990/ month. While the typical two bedroom rents for $3200/ month. One bedroom rents are now up a staggering 14% year over year, while two bedroom rents are up just 3%. The rent increases are sure to exacerbate the current housing crisis, but will ultimately help landlords shoulder the burden

Steve Saretsky -

Condos Continue to Increase Their Market Share of Total Sales; Detached Shrinking Over the past few months i’ve continuously highlighted the growing trend for buyers choosing condos over single family homes. The desire for Vancouver condos continues to grossly outpace single family homes, for obvious reasons, affordability. With foreign buying activity dwindling, in large part thanks to China’s capital controls which are halting overseas real estate investment, the market for Vancouver detached homes has been shrinking. (Single family home sales above $3 Million have plunged 27% ) Single family homes as a percentage of total market sales dropped to 22.8% in July, 2017. In simpler terms, for every 100 sales in Vancouver, roughly 23 are detached homes. This number has been steadily dropping since it peaked in January 2016 at 34.8%. With the detached housing market peaking in early 2016, for various reasons, the sales mix began to shift towards condos. The share of sales for Vancouver condos increased from 59.1% in January 2016 to 68.2% in July, 2017. I expect this trend to continue as the PBOC remains serious about controlling capital outflows.  With the average single family home out of reach for the majority of locals, prices appear

Steve Saretsky -

A Year Later, The Debate Continues. Did the Foreign Buyers Tax Work? It’s been just over a year since the BC Government announced the 15% foreign buyers tax. A tax that was aimed to cool the market and squash speculative activity. So, did it work? The tax was designed to “cool” the market, not crash it. From January 2014 to January 2015, the average sales price of a Vancouver detached house increased by 42%. From January 2015 to January 2016 prices increased a further 43%. From January 2016 to January 2017 the average sales price dropped 20%. Also note the 6 month moving average, which is on a clear trajectory downwards, peaked in August, 2016 the same month the tax was implemented. Detached Home Flipping Hits The Brakes Further, detached house flipping has been nearly cut in half. In 2016, Vancouver detached houses being flipped within one year made up 4.46% of sales, and reached 8.1% over a two year window. It has since dropped to 2.29% and 5.7% respectively. So we’ve since had an immediate halting of detached home prices and flipping activity. Yet condos continue to rise, so what gives? Condo Prices Still Increasing Despite many Vancouverites hoping

Steve Saretsky -

The Tale of Two Markets- A Year After the Foreign Buyers Tax Although I normally don’t like to look too much at mid month numbers, the heavily requested mid month market update is back. Like i’ve been saying for awhile, it’s a tale of two markets. The detached and condo markets appear to be going in very opposite directions. Sales have had a decent uptick from August 2016 but keep in mind that was the first month of the foreign buyers tax, a move that stunned the market. Vancouver Detached Market Vancouver detached sales through the first 15 days of August hit 74 total sales. This was good for a 25% increase compared to last year. However, it was still the third lowest totals in the past decade. Sales continue to putter along, dragging it’s feet, particularly in the Luxury real estate market where sales have plunged 27%. New listings have also dropped in the first few weeks but appear to be settling in right around it’s ten year average. Vancouver Townhouse Market Townhouse sales are also on the upswing. This is partly attributed to new inventory hitting the market. Vancouver townhouse sales jumped from 24 sales in August 2016

Steve Saretsky -

BC Real Estate Market Slows, Dollar Volume Falls 19% Year to Date It was the Vancouver Real Estate market that initially got the party started. As prices began to climb, the contagion spread across the province. Prices across BC ignited, house lunacy resulted in multiple offers in Prince George, and double digit price gains in Chilliwack. However, Recent data released by the BC Real Estate Association suggests the province could finally be cooling. The total dollar volume, which tracks the overall dollars spent on BC Real Estate fell 19% year to date. BC homebuyers have spent a whopping $10.9 Billion less this year. Most of the declines came from Greater Vancouver, which suffered a 26.3% decline, followed by the Fraser Valley & Victoria. Sales & Prices Total unit sales fell 17% across the province year to date but remain above the ten year average. The average sales price year to date dropped 2.8% for BC. The biggest decline was felt in Greater Vancouver, where luxury home sales have ground to a halt.  However, with that being said the year over year price movement haven’t changed much. Comparing July 2016 to July 2017, the average sales price is still up 5% for BC.

Steve Saretsky -

Number of Vancouver Condo Sales Sold Over Asking Price Dips to 49% In July You know it’s a crazy market when you have to call 49% of Vancouver condos selling over asking price a slow down. While it’s probably not the number local buyers were hoping for, any slowdown is welcoming news. In July, the percentage of Vancouver West condos which sold over asking price dropped from 53.9% in June to 48.6% in July. Sales to Actives Ratio Also Falls In July The sales to actives ratio which is key indicator when determining market conditions also slid downwards in July. The ratio fell from 68% to 43% for Vancouver West. This is part of a seasonal down trend which is expected this time of year, however, it’s also a decline of 7% year over year. Days on Market Remains Virtually Unchanged Despite the minor slowdown, the days on market remains virtually unchanged. The median days on market for Vancouver West condos is 9 days, which is the exact same as it was a year ago. Overall it’s a welcoming cool down, if you can even call it that. It sure beats a sales to actives ratio of over 200% for

Steve Saretsky -

Vancouver Homeowners Tapping Into Equity at Alarming Rates With Vancouver real estate prices surging over the past few years homeowners are tapping into their equity (refinancing) at alarming rates. It’s important to understand refinancing and how CMHC quantifies refinancing. “The consumer had a mortgage previously, opened a new mortgage in the current year, the address did not change, and the total mortgage balance increased by more than 10%.” The big takeaway in this scenario is that homeowner mortgage balance had to increase by more than 10% to quantify as a refinance. As per the latest data from CMHC, Vancouver homeowner refinancing (drawing equity) increased 27% year over year. Perhaps even more alarming is the massive growth in consumer refinancing for Abbotsford/Mission. Home prices have surged in these generally lower income areas and with that homeowners are tapping into recently discovered wealth. This is what economists call ‘the wealth effect’. As home prices increase, homeowners feel wealthier, so they tend to borrow and spend more. This was the case in the United States during their housing boom, as researched in the Book ‘House of Debt‘ . From 2002-2006 low credit-score homeowners borrowed an average of $0.40 for every $1 increase in

Steve Saretsky -

Luxury Home Sales In Vancouver Slump Amidst Tightening In China China has been on an aggressive effort to curb capital outflows. As of July 1, Chinese officials took it a step further limiting foreign currency transactions to a paltry $9,000. According to one of the foremost experts on the Chinese economy, Anne Stevenson-Yang, of J. Capital Research Ltd., says the new controls are aimed at stopping “ants moving house.”  A Chinese term for getting a lot of people to make small money transfers to ultimately transfer enough to buy property. But people find ways around the rules, she says. The wealthy often already have their money offshore, so they are not affected by new controls. Regardless, foreign exchange reserves have increased every month since January. And while the impacts on global real estate might be up for debate, the slowdown is already rearing it’s ugly head in Vancouver’s luxury market. Single family home sales above $3 Million have plunged 27% year over year while inventory has spiked 24%. The slowdown also correlates with the BC Government’s latest data which suggests foreign buyers have been dwindling for months. Time will tell how long China is able to sustain recent tightening. If China remains

Steve Saretsky -

Vancouver Condo Prices Continue to Accelerate in July Vancouver condo prices continued to tick upwards in July. A similar trend if you read the June report.  The average sales price hit $880,197 which is good for an 8% increase year over year. New listings saw a small increase but not enough to help inventory levels which are stuck at historical lows. Vancouver Condo Sales Vancouver condo sales fell 2.5% year over year, and for the first time since 2014, sales dipped below the ten year average for the month of July. With that being said sales remain robust and multiple offers continue to ravage desperate buyers. New Listings/ Inventory Levels A sigh of relief for all buyers, new listings for Vancouver condos increased 4% year over year and were just slightly shy of the ten year average. However, the big problem remains ultra low inventory levels. After years of excessive demand it has plunged inventory levels to record lows. With sales hardly slowing, inventory levels have not been able to replenish. The 975 active listings at the end of July, 2017 were the fewest recorded in recent history. Vancouver Condo Prices The price per square foot for Vancouver condos increased

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The Canadian Economy

Steve Saretsky -

Canadian GDP Hits 4.5% In Q2 2017 Despite Drop In Residential Investment The Canadian economy accelerated at it’s fastest pace in nearly six years. GDP growth hit 4.5% in the second quarter of 2017, defying just about everyone’s expectations. Perhaps even more surprisingly was the large growth despite a significant...

Steve Saretsky -

Loans Secured Against Canadian Real Estate Increases 11% Year over Year Our good friends over at Better Dwelling are reporting that Canadians Are Borrowing Against Real Estate At The Fastest Pace Ever. According to the report, which sites recent data from OSFI (Office of the Super Intendant of Financial Institutions), nearly...

Steve Saretsky -

TD Bank Releases Latest Data on Canadian Real Estate- Provides Optimistic Outlook TD Bank released their latest data on the Canadian Real estate markets and provided their outlook on what’s to come. To little surprise, TD Bank forecasts a soft landing equivalent to that of Captain Sully’s landing of American...

Steve Saretsky -

Province Approves 4% Allowable Rent Increase for 2018 Housing is about to get more expensive for renters in BC. This week the BC Government set the legally allowed rent increase at 4% for the upcoming year. Landlords will be able to increase monthly rents by up to 4% in 2018. For...

Steve Saretsky -

Condos Continue to Increase Their Market Share of Total Sales; Detached Shrinking Over the past few months i’ve continuously highlighted the growing trend for buyers choosing condos over single family homes. The desire for Vancouver condos continues to grossly outpace single family homes, for obvious reasons, affordability. With foreign buying...

Steve Saretsky -

A Year Later, The Debate Continues. Did the Foreign Buyers Tax Work? It’s been just over a year since the BC Government announced the 15% foreign buyers tax. A tax that was aimed to cool the market and squash speculative activity. So, did it work? The tax was designed to...

Steve Saretsky -

The Tale of Two Markets- A Year After the Foreign Buyers Tax Although I normally don’t like to look too much at mid month numbers, the heavily requested mid month market update is back. Like i’ve been saying for awhile, it’s a tale of two markets. The detached and condo...

Steve Saretsky -

BC Real Estate Market Slows, Dollar Volume Falls 19% Year to Date It was the Vancouver Real Estate market that initially got the party started. As prices began to climb, the contagion spread across the province. Prices across BC ignited, house lunacy resulted in multiple offers in Prince George, and...

Steve Saretsky -

Number of Vancouver Condo Sales Sold Over Asking Price Dips to 49% In July You know it’s a crazy market when you have to call 49% of Vancouver condos selling over asking price a slow down. While it’s probably not the number local buyers were hoping for, any slowdown is...

Steve Saretsky -

Vancouver Homeowners Tapping Into Equity at Alarming Rates With Vancouver real estate prices surging over the past few years homeowners are tapping into their equity (refinancing) at alarming rates. It’s important to understand refinancing and how CMHC quantifies refinancing. “The consumer had a mortgage previously, opened a new mortgage in...

Steve Saretsky -

Luxury Home Sales In Vancouver Slump Amidst Tightening In China China has been on an aggressive effort to curb capital outflows. As of July 1, Chinese officials took it a step further limiting foreign currency transactions to a paltry $9,000. According to one of the foremost experts on the Chinese...

Steve Saretsky -

Vancouver Condo Prices Continue to Accelerate in July Vancouver condo prices continued to tick upwards in July. A similar trend if you read the June report.  The average sales price hit $880,197 which is good for an 8% increase year over year. New listings saw a small increase but not...

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The Saretsky Report. December 2022