THE MARKET HAS SLOWED
We’re in a correction, but it’s nothing like the 2008 crash. This year we have seen a slow down in overall market activity as the volume of real estate sales is down compared to this time last year. We had a good run, through 2016-2017 we saw a 40-50% increase in property values which is not sustainable growth. Now, the market is becoming more balanced, less chaotic, which means that buyers are able to put subjects on their offers again. The days of bidding war after bidding war, and buyers taking on extreme risk of subject free offers seem to be over… for now.
WHAT ARE HOUSING PRICES DOING?
Well… it depends. Every property type and city seem to be experiencing different levels of change.
We’re seeing about 5-10% reduction off peak pricing for your typical condos, townhouses and detached houses in the markets we work in. These are for your move-in ready, entry to mid level price points.
- Condos in Vancouver under $1M, and suburb condos under $700K
- Townhouses in Vancouver under $1.2M, and suburb townhouses under $900K (excluding Fraser Valley)
- Houses under $1.6M
In terms of cities, less expensive suburbs close to Vancouver (New Westminster, Port Moody & Port Coquitlam) seem to be holding up particularly well.
- Luxury homes
- Land value
- Fixer uppers
- Busy streets or prominent negative feature
For some property types we’re seeing upward of a 20% adjustment from peak pricing. In terms of cities, the more expensive ones; West Vancouver, North Vancouver, Burnaby, Richmond, Vancouver West. Due to significant increase in supply of $2M+ homes. In the hot 2016 and 2017 market, buyers were less picky, foreigners were propelling the luxury market and builders were hungry for land. All of this has changed.
Pre-sales for new condo developments remain to be hot. We’re still seeing peak pricing, lineups and quick sellouts in this sector. In particular, we’re referring to more affordable price points, in desirable locations with easy access to public transit. Too much speculation? We’ll have to wait and see.
New mortgage stress test and higher interest rates! Long story short, lending is getting tighter. Buyers that qualified for a $500,000 mortgage in 2017, and now qualified for $400,000. This paired with and increase in interest rates of more than 1% in the last 18 months could start showing it’s colours in late 2018 or early 2019.
Stress test info: https://www.ratehub.ca/blog/how-to-stress-test-your-mortgage/
OUR THOUGHTS & PREDICTIONS:
JAMES: “It’s hard to predict a crash, and corrections happen often. In fact, we’ve seen fall market corrections over the last 3 years. This one is slightly worse than the previous years, which is due to an oversupply of expensive real estate. Personally, I believe that we’re in the worst of themarket correction now. The stats are out there, fear is out there and the media is publishing negative press… same as every correction in previous years. We just seem to forget.”
DENNY: “The Fall is likely going to have a surge in sales activity for a couple months, but I expect prices to remain flat. Typically we see the activity pick up in the New Year, so I would not be surprised if the market goes on a small run early in 2019. As for next spring, I think we’ll see an increase in prices of around 5-10%, due to the seasonality of the real estate market and buyer/seller behaviour.”
JAMES: “Buyers, keep looking and think long-term. Ignore the media and buy with confidence if the right place comes up. The inventory is higher than its been in the last couple years, demand is down and I think there will be some great opportunities out there this Fall. Plus, enjoy the luxury of a subject offer… it was rare for
most of 2016 & 2017.”
DENNY: “Sellers, keep things in perspective. Timing the peak of any market is impossible to predict, but looking back to 2015, property values are still 25-50% higher today dependant on location. That’s a pretty solid return on investment in a very short period of time. If you are thinking of selling this Fall, be realistic about pricing. Over pricing a listing in this market can be detrimental to its success, and could result in a frustrating experience. Good product will sell, but expect a few more days on market than we’ve seen in previous years. Now is not the time to launch that $3 Million dollar home. Wait till spring.”