Inventory for One Bedroom Vancouver Condos Sinks 53% Year over Year A great purge of condo inventory is under way, particularly in the one bedroom segment. With the market flooded with first time buyers coupled with investors looking to add to their investment portfolio, one bedroom units have become a rare commodity. Vancouver condo inventory for one bedroom units has plummeted by 53% year over year, hitting a 12 year low. This historic drop is most prominent at the one bedroom level as it’s essentially the entry point for most buyers. With two bedroom inventory not far behind, and also scrapping a 12 year low. To highlight just how dire a situation the Vancouver condo market is in, the sales to actives ratio for one bedroom units is still a mind blowing 107%. A number that has never been seen recent history. A speculative mania has buyers bidding up condos at a rapid pace with little signs of slowing down (average price per square foot up 19% this year). The question now becomes how much higher can it go? Will a hawkish Bank of Canada and rising interest rate be enough to douse the flames? Surely one has to think.

Vancouver Detached Market Softens, Attached Prices Push Forward If you read either of my latest Vancouver Detached Report or Vancouver condo Report you’d already know these two markets are going in very opposite directions. Unfortunately there’s a lot of stats out there confusing a mass of Vancouverites. With the latest August headlines proclaiming a rebound in sales and prices what they fail to take into account is we are comparing August 2017 to August 2016, the same month a once in a lifetime foreign buyers tax was introduced. A policy which instantly halted activity and sent sales and prices plunging. To get a more accurate picture, I have taken a year to date approach. Comparing January 01 to August 31, each year, for the past 7 years. That’s a full 8 months worth of data to look at, not just one month. Here’s how the market shapes up. Vancouver Detached Average Sales Price Down 9% For January 01- August 31, 2016 the average sales price of a detached home in Vancouver was $2,864,520.00. Comparing the same time frame this year, the average sales price was $2,607,377.00. That’s a 9% drop. The median sales price dropped even further, from $2,339,000 to $1,980,000, a 15%

Bank of Canada Hikes Interest Rates Again, Mortgage Costs on the Rise The Bank of Canada announced another interest rate increase today, increasing the overnight rate by 0.25 basis points in a move that mostly surprised markets. Although I mentioned the strong possibility of it last week. The move may also come as a surprise to many homeowners or potential buyers as borrowing costs are on the upswing. Not good news for Canadians who have now secured a record number of loans against Canadian Real Estate, up 11% this year alone. Mortgage Costs Many of the big banks today also increased their prime rate from 2.95% to 3.2%. So If you’re carrying a variable rate mortgage expect to be paying an extra 0.25 basis points moving forward. 5 Year Fixed Mortgage Costs are also trending up, with Scotia Bank increasing their rate today to 3.29%, while BMO increased theirs to 3.19% just last week. If you want to get a better sense of where the fixed term mortgage rates are going then watch the 5 year Canadian Government bond yield which has now jumped 82% (+75bps) in the past 90 days. Of course this also means your HELOC will interest

Vancouver Condo Prices Jump Another 1.5% in August The Vancouver condo market continues to defy logic, as the average price per square foot jumped another 1.5% month over month, pushing the total increase to 13% this year. Perhaps even more concerning, total inventory plunged to it’s lowest totals in recent history, with just 849 active listings for sale. See last month’s Vancouver Condo Report. Vancouver Condo Sales Vancouver condo sales increased 20% year over year. However, this is comparing it to last August when the market froze to a sudden announcement of a foreign buyers tax. Vancouver condo sales were still 15% above the ten year average. New Listings/Inventory Levels Vancouver condo new listings fell 8% year over year, and were 14% below the ten year average. This is definitely not helping replenish already historically low inventory levels. The biggest issue lies in overall inventory levels which continue to trend lower. Inventory fell 35% year over year. Vancouver Condo Prices The average sales price hit $849,325 in August, which is up 17% year over year. The price per square foot for Vancouver condos increased to $1012, up 19% year over year. Click Here To Access Price Per Square Foot By

Detached Market Continues to Cool In August A trend is emerging over the past several months in the detached market space. The sales to actives ratio has been slipping, sales are slow, and price growth has stalled. The detached segment has now shifted to a balanced/ buyers market depending on the area. View July detached report here. Detached Sales While there was generally an increase in sales year over year for most areas, this was due to the implementation of a foreign buyers tax which was introduced without warning in August, 2016. With that being said, Vancouver West experienced fewer sales this August than it did one year ago. This is substantial and worth noting as the higher end detached market has been severely impacted from a slow down of foreign capital. New Listings & Inventory New listings across REBGV fell 7% and were 4% below the ten year average for the month of August. Overall inventory levels were down 1% from one year ago. Sales to Actives Ratio REBGV- 16% Vancouver East- 15% Vancouver West- 7% Richmond- 12% Burnaby- 12% As you can see, the detached market is in either a balanced market or a buyers market depending on

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

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

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

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

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

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

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