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Vancouver luxury home

Vancouver’s Luxury Housing Market Accumulating a Logjam of Inventory

Steve Saretsky -

As is typical in all housing corrections, luxury properties are the first on the chopping block while also suffering the steepest of price discounts. This is ultimately the result of a much smaller buyer pool that, when it shrinks, creates liquidity constraints. As the housing cycle turns, and liquidity dries up the luxury market becomes extremely prone to volatility and wild price gyrations. As a result, bank credit also seizes up, further hampering liquidity when it is most needed.

It appears this phenomenon is playing out in the Greater Vancouver housing market. With global growth slowing, and Chinese capital controls becoming even more severe, luxury home sales have ground to a halt. Add in an increased foreign buyer tax which has been bumped to 20% of the purchase price, a confiscatory annual speculation tax of 2% which targets real estate holders who earn an income outside of BC, and an added annual “school tax” of 0.2% for homes assessed between $3 million and $4 million (a 0.4% tax rate on the portion above $4 million) and it becomes increasingly more evident of the deepening sorrows in the luxury housing market.

Greater Vancouver home sales of $3M and above fell 45% year-over-year in January. It was the fewest luxury home sales for the month of January since 2013, a time when there were much fewer homes in that price bracket.

Meanwhile, $3M plus inventory continues to pile up, despite home prices in this segment plunging.

As of today, there is 41 months of inventory for sale, a sharp rise from the 4 months of inventory recorded during the housing mania just three years ago.

With a log jam of inventory at the high end and increased taxation just being rolled out for 2019, the luxury housing market remains in the cross hairs of an angry mob of price sensitive buyers.

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The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

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The Saretsky Report. December 2022