Home sales in 2021 in Metro Vancouver made an all time high. There were 43,999 sales in 2021. That is 42.2% higher than last year, 73.6% higher than 2019 and 4% higher than the previous all-time high set in 2015.

In the past year, both detached home and townhome benchmark prices increased 22% while apartment increased 12.8%. Maple Ridge saw the largest increase. 34.7% for the overall benchmark price and 42.2% when we just look at detached homes only.

For the month of December, it was another strong month. Even though the sales were 13.1% lower than last December and 21.6% lower than last month, it is still 33.4% about the 10-year December average. Last month was 33.6% above the 10-year November average, so I would argue the market did not cool down in December.

The prices definitely did not. In the month of December, the benchmark prices for detached homes went up 2.1%, for townhomes it went up 1.5% and for apartments it went up 1.2%. It is no surprise when you look at the sales-to-active listing ratios as it continued a 6 month trend of heading higher. Sales-to-active listing ratios is a metric that gauges the supply and demand of the real estate market and serves to indicate price action. When the ratio is above 20% for months, then prices are expected to move up.

Most people expect a healthy market in 2022. Slower sales volume but still much above the 10 year average while prices will continue to increase but also at a slower pace.

The post December 2021 Vancouver Real Estate Review first appeared on John Chan Mortgages.

The new listings have slowed down compared to last month and the total inventory is about 1.2% lower than in May.

The sales-to-active listing ratios are still high. It is believed that when ratios are over 20% for sustained periods, there will have upward pricing pressure. For June, the sales-to-active listing ratio for detached home is 27.5% and correlates with a 0% month to month increase in benchmark price. For townhomes the ratio is 49.2% with a 1.1% increase in price in the month of June. For apartments the ratio is 37.1% and it had a 0.1% increase in the benchmark price in the month of June. As you can see from the chart below, the sales-to-active listings ratio has been declining and so have the monthly price appreciation.

However, do not expect the price to soften much. While the multiple offers during a hot market quickly push the prices up, there is no equivalent process that drops prices. Hope you all had a great Canada Day and Go Canadians Go!

The post June 2021 Vancouver Real Estate Review first appeared on John Chan Mortgages.

March had 5,708 sales. The highest ever recorded single month sales figure. This is 72.2% above the 10-year March average.

It is hot everywhere in Metro Vancouver, but the areas achieving the greatest sales increases are further from the city centre. Delta – South saw a 195.8% increase from March 2020. Whistler saw a 194.7% increase while Squamish saw a 188.6% increase in sales.
There was a 64.2% increase in new listing from last month and this was enough to increase the total inventory of listed homes by 9.4% from last month. However, the rapid pace of sales prevented a significant build up of inventory. The inventory is still 4.8% lower compared to March 2020 and is 18.6% below the 10-year March total listings average. So the supply is still tight.

The sales-to-active listings ratio is a measure of supply and demand. Ratios between 12 and 20% are considered balanced and any numbers above 20% indicates upward pressure. The ratio for detached home is 52.9%. It is 79.9% for townhomes and 65.4% for apartments.
 
Which such high ratios, it is expected that house prices should increase and they did. The benchmark price for a detached home increased 17.9% from March 2020 and 4.9% when compared to February 2021! Almost 5% in a month. That’s crazy! The benchmark price for an apartment went up 3.7% from March 2020 and up 2.6% when compared to February 2021. The benchmark price for an attached home went up 10.4% from last March and 3.9% from last month.

WHY IS IT SO HOT?

Is this a local phenomenon? For decades Vancouver’s unique position in Canada and the world gave it’s real estate market a trajectory that stood apart from the rest of Canada. But in 2016, the governments stepped in to cool the market with the implementation of the foreign buyers tax, speculation tax and empty home tax. It was effective in stalling the market, but an ember of demand smoldered beneath the surface. But his time it is different. The demand was internal and what set it off was a larger Canadian and global trend.
 

In fact, the entire Canadian real estate market is hot. Since covid, the possibility of working from home has ballooned and so has interest in moving further from the city. Stats Canada had said that it is plausible that 35% of Canadians can work from home. A recent Royal LePage survey indicated that 47% of Canadians aged 25 to 35 prefer to live in small town or countryside. The chart above breaks this down by cities polled. While young Vancouverites prefer the city, nationwide there are more young people preferring to live in small town or countryside than in the city! This correlates with the massive jump in prices and sales in secondary market and rural areas. The Re/Max housing outlook report table indicates that in 2020 markets like Windsor, Niagara and Muskoka all had outsized gains. CREA reported similar results, though the numbers are not identical, the trend is the same. Outsized price gains in 2020 for markets outside large city centres, particularly Toronto. The Nova Scotia Association of Realtors, said the number of houses sold in February rose 31.9 per cent from February 2020, while average prices rose by 30.4 per cent. Even Whitehorse, Yukon saw their average home price increase 13.9% in 2020.

But this is not limited to Canada.  Knight Frank puts out a House Price Index for 56 countries and territories annually. For 2020, 89% of them recorded an increase in price. Global residential property prices are rising at their fastest rate in nearly 3 years. From Fig 1 and Fig 2 of the Knight Frank report, you can see how house prices dipped during the 2^nd quarter of 2020 but recovered and more by the end of the year. Average global house price rose faster in 2020 (5.6%) then in 2019 (5.3%). In terms of growth, we are only ranked 11^th.

I believe central banks monetary policies are behind most of the rise in real estate prices and assets prices in general.  Injecting cash to offset the expected damage from economic contraction due to the pandemic was/is necessary. And in general most economists seem to agree this is the way to go. The lesson learned from the 2008 financial crisis was that massive action is needed to head off damage. However, these cash injections are a rough tool. The money doesn’t just go to the individuals who need it. This is more like throwing a bucket of paint at a canvas versus painting between the lines with a brush. This sets up a classic economic 101 scenario. Excess money chasing the same baskets of goods. Price inflation! And you can see evidence of this in the stock market as well as the housing market. All the North American indices are at or near record highs.

SO WHAT WILL HAPPEN NEXT?

In terms of interest rate, Bank of Canada seems happy keeping the rates low. The unemployment rate is still high, so for the time being there is no inflation fears and as of March 10^th they are sticking to the plan of no rate hikes until early 2023.

CMHC just released their Housing Market Assessment which assesses the vulnerability of real estate market as it related to Canada’s financial stability. Vancouver real estate market is only at moderate risk. And the key concern is high vacancy in rental units. While 5 of the 16 markets are at high degree of vulnerability, both Bob Dugan, CMHC’s chief economist and Benjamin Tal, CIBC’s deputy chief economist believes a correction is not on the horizon. Well at least with the current data.

Housing now makes up nearly 10% of Canada’s GDP which is approximately 50% higher than our historical average and twice that of the US. So the government is not going to do anything drastic in the short term.

And once vaccinations become widespread and travel restrictions are loosen, international demand will once again come into play in the local real estate market. I believe this is a key reason why people are jumping into the market now. They see this as their last chance before they will start to compete with the rest of the world again. Vancouver continues to be a focal point for the world. Recent publicity includes the ranking by CIA Landlord of UK which has Vancouver as the best city to buy when you are young and the number 2 most affordable city for young adults. While those lists rankings are debatable, it keeps Vancouver top of mind. And a reason why there will be support for local real estate.

Also as the Communist Chinese government remove western style freedoms in Hong Kong, there are anecdotal reports of Canadian expats who are considering coming back to Canada. Whether they actually move back en masse is still in question but 43.6 billion CDN was recorded flowing from HK to Canada in 2020 through electronic fund transfers alone. Hong Kongers who are not permanent residents will need to wait for their PR status to avoid the 20% foreign property transfer tax. So purchases from the possible migration of people from HK will play out over several years. I think this will help cushion any price drop that will occur in the rest of the Canadian real estate market when the central banks eventually remove the monetary stimulus. Well, this is my best guess. Thanks for reading.

The post March 2021 Vancouver Real Estate Review first appeared on John Chan Mortgages.

Sales this February is 73.3% higher than last year and 56% higher than last month. This sales figure is 42.8% above the 10-year February average. A major contributing factor is that the supply is not keeping up with demand. Even though there are 26.1% more new listing this February than last, the total number of homes listed is 9.1% lower than last February.

It seems like the millennials are out buying homes while older owners are not selling until the medical crisis is under control. A report by Royal LePage said that 49% of the residents aged 25 to 35 in BC own their own home and 27% of them purchased it since March 2020. This can be a factor in the shortage of supply and one wonders whether the supply will significantly increase once most of the population is vaccinated.

The sales-to-active listings ratio for detached homes is 41.8%, for townhomes is 61.8% and for apartments it is 41.7%. Typically, what is said is that home prices experience downward pressure when the ratio dips below 12% for a sustained period, while upward pressure on prices happen when it surpasses 20% over several months. However, ratios at these level shows an immediate impact on price.

Detached home prices shot up 2.8% from January and is up 13.7% from February 2020. For apartment homes the price was up 2.5% from January and is up only 3% from February 2020, reflecting how apartment is the weakest segment of the market. Townhomes shot up 2.9% from last month and up 7.2% from February 2020.

One person’s overbid becomes the next person’s baseline. With each multiple offer, there are many who loses out and are tempted to overbid next time. This creates an environment where prices can quickly get out of hand. This is why in RBC Economics’ most recent report it warned that the market maybe overheating. But the pros have been wrong before. Below is a graph of what CMHC’s predictions were last year along with what actually happened. The graph is precipitously steep. I can definitely see activity slowing down but it is harder to predict if there will be a retracement of prices.

The post February 2021 Vancouver Real Estate Review first appeared on John Chan Mortgages.

The home sales in January was 52.1% higher than January 2020 and 36.4% above the 10-year average. Another strong month.

The interest continued from December, but it seems like the inventory has not kept pace with demand. This is what insiders are attributing to the rise in prices. There is a surge of new listings but the total inventory is 3.6% less than January 2020.

The sales-to-active listings ratios continue to be above 20% across all property types. This is the level where upward pricing pressure occurs. For detached homes the ratio is 26.3% and correspond to a price increase of 10.8% over January 2020 and 1.4% over December 2020. For apartment homes the ratio is 27.8% and corresponds to a price increase of 2.2% over the last 12 months and 0.6% over the last month. For attached homes the ratio is 37.6% and accompanied by a 4.3% price increase from last year and 0.2% from last month.

While most real estate predictions remain negative, the market does not care. The BC Real Estate Association’s prediction seem to be going with the flow of the market and is forecasting a 15.6 per cent rise in sales over 2020 and a 7.7 per cent rise in the MLS average price for 2021.

While the prices for real estate going forward is uncertain, what is certain is taxes! If you live in Metro Vancouver, the Capital Regional District and other select areas in BC, you will be getting a letter to remind you to file for the exemption to the Speculation and Vacancy Tax sometimes in February. You can check the mailing schedule HERE.

If you live in Vancouver, you would have had to file for exemption to the Empty Home Tax as well. These are two different taxes. Confusing. I know. Annoying. Can’t agree more

Have a great month! Happy Valentine’s Day and Happy Lunar New Year. This is the year of the Bull. Maybe that is why both housing and the stock market is going up? Just kidding. I don’t believe in stuff like that.

The post January 2021 Vancouver Real Estate Review first appeared on John Chan Mortgages.

Looking back at 2020, it is totally bizarre that it would take a pandemic to boost the real estate market. After two years of declining values, BC Assessment records show increases of 0% to 10% for properties in BC.

And note BC Assessment is a snapshot of value based on July 1 of last year, so the current value is probably a bit higher now.

As a whole the year’s real estate numbers are middle of the road. The total sales number was 2.8% below the 10-year average and the total listings were 2.7% below the 10-year average. Considering two years of declining values and weaker sales, a middle of the road year is a good year. And for a pandemic year, fantastic! The year ended with the benchmark price for detached homes up 10.2%, for townhomes up 4.9% and for apartments an increase of 2.6%.

Because of the halt to the market when Covid-19 started, it seems the sales were just pushed back to the end of the year. As a result, the sales number this December was the highest ever! It was 57.7% above the 10-year December average.

The sales-to-active listings ratio is a measure of the demand for real estate. When it is above 20% the demand is so great that there is an upward pressure on price if this is maintained. And when it is under 12%, there is downward pressure on the price. For detached homes it is 35.2% for December and the benchmark price went up 1%. For apartments, it is 33.1% and the benchmark price was unchanged for December. For attached homes, the ratio is 50.4% which is extremely high but the benchmark price was actually down 0.1% from November. With such strong numbers, it maybe be true that the market will continue to be strong in 2021.

However, predictions are all over the place. And with covid-19, the new variants and the vaccine rollout, it is harder than ever to predict. Re/Max predicts a 4 to 5% increase in Vancouver home prices in 2021. Royal LePage predicts Greater Vancouver median price of a detached home will increase by 9% in 2021. Central 1 Credit Union predicts a 5.6% rise in media home prices in 2021. BC Real Estate Association is predicting a 1.3% increase in prices in Vancouver.

Veritas Investment Research believes an increase in mortgage defaults and investors selling their rental units will cause the price to drop. Depending on the number of defaults, they are expecting a drop of 10% to 17% in Vancouver prices. CMHC has not changed their forecast from May which calls for a drop of 9% to 18% to Canadian house prices. That also came with a prediction of a high mortgage default rate of about 0.6% by now. However, the current rate is closer to 0.3%. I wouldn’t worry about it until that default rate moves up significantly.

RBC’s prediction for Canadian home prices is probably a good indication of how difficult it is to make a prediction. Their base case calls for an 8% drop in prices over the next year. However, they have a best-case scenario where there is a 6.1% increase in price, but the worse case scenario is a 29.6% drop. I am going to stick my neck out and say it is somewhere in-between:)

The post December 2020 Vancouver Real Estate Review first appeared on John Chan Mortgages.

With more jobs allowing for work from home, condos in the city have fallen out of favor. This is allowing people to move further from the city to find value. Increased workspace and a yard have become more important. These factors explain the why townhouses are in high demand and why apartment prices dropped over the last month. This also shines a light on why the Sunshine Coast had an 82.8% increase in sales over the last year.

The sales-to-active listings ratio for November is 27.9% for detached homes, 40.1% for townhomes and 23.9% for apartments. Above 20% indicates upward price momentum.

The MLS Home Price Index composite benchmark price for detached homes is $1,538,900. This is a 9.4% increase from last year and 1% increase from October. For attached homes, the benchmark price is $814,800. This is a 5.6% increase from last year and a 0.2% increase compared to October. For apartment homes, the benchmark price is $676,500. This is a 3.4% increase from last year and a 1% decrease from October!

The Bank of Canada has left the current policy rate untouched at 0.25%. It has added that they do not expect to raise rates until sometimes in 2023 according to their projections.

We are still getting predictions for real estate price drops next year, but these predictions have not panned out so far. When you look at how much money the Canadian government has put into the economy in terms of percentage of GDP, it leads all developed countries at around 16%. US is only around 8%. And the government has already committed billions more. It is hard to appreciate how this warps the economy. I would not be surprised if the real estate prices do not drop at all with the exception of condos in some select markets.

The post November 2020 Vancouver Real Estate Review first appeared on John Chan Mortgages.

The sales-to-active listings ratios point to townhomes as being the hottest segment. This is probably due to the combination of affordable price range and livability. More people are wanting a larger space because they are working from home. The sales-to-active listings ratio for detached homes is 30.9%, for townhomes is 43.5% and for apartments 24.9%. Apartments is the weakest segment but any time the ratio goes over 20%, it is considered to be an indication of upward pricing pressure. When the ratio is below 12%, then it is indicating downward pricing pressure.

The benchmark price for a detached home increased 8.5% year over year and increased 1.1% over last month. For attached home the benchmark price increased 5.4% year over year and increased 0.4% over the last month. The benchmark price for an apartment increased 4.4% year over year but remained unchanged from last month.

The latest report from RBC Economics came out on October 29, stating how risky the housing market is in Vancouver, but it fails to give new reasons to support the theory. The old reasons such as high unemployment, high mortgage deferral rate, end of mortgage deferral, lower immigration and over supply of condos are reiterated.

In terms of mortgage deferral rate, some believe most people who are on it do not need it. Antidotally, I have come across people who were on mortgage deferral who were looking to buy a rental property. Some analysts believe that 1 in 5 people who deferred their mortgage will default since the mortgage deferral program has ended. However, I think some of them would have sold their property in this rising market, so there will not be a rapid disorderly exit of the real estate market. And whether the real estate market will drop at all, I believe depends on how much the money the government is willing to put into the economy. And how can you predict that?

The post October 2020 Vancouver Real Estate Review first appeared on John Chan Mortgages.

The sales-to-active listings ratio indicates that this is a seller’s market. By

property type, the ratio is 28.3% for detached homes, 36.1% for townhomes, and

24.8% for apartments. Any time the ratio is above 20%, there is upward pressure on prices.

For detached homes, the benchmark price increased 1.1% from last month and 7.8% from a year ago. The benchmark price for attached homes was up 0.4% from last month and 5.2% from a year ago. Apartments had the weakest numbers, but it is still up 0.3% from last month and 4.5% from a year ago.

All this was going on while prognostication of a market downturn continues. Moody’s is predicting a drop in detached home prices of 6.7% and a drop in condo prices of 6.5% in 2021. CMHC reiterated that they stand by their forecast in May that average prices would fall between 9% and 18%. There was an interesting comment in an UBS report on global real estate bubble risk that I think shed light on this situation. In this report, UBS analyzed real estate in 25 cities around the globe. Vancouver and Toronto were the two Canadian cities covered. About half of the cities in the report were either bubble risks or “significantly” overvalued. The author commented that four quarters of rising real estate prices during a global recession is unsustainable noting that it has been nearly 15 years since prices rose in so many global cities at once. This confirms for me that it is the covid-19 related monetary stimulus that is occurring across the globe that must be causing the strength in the various real estate markets. For Canada some have estimated that for every dollar of salary lost due to the pandemic, the government have replaced it with approximately $2.50. And I bet some of that money has made its way into the real estate market.

The post September 2020 Vancouver Real Estate Review first appeared on John Chan Mortgages.

The August sales volume is 19.9% above the 10-year average. There was enough competition in the market to drive the prices up. The benchmark price of a detached home went up 1% from July 2020. For an apartment, the benchmark price went up 0.5% from July 2020. And for an attached home, it went up 1.1% from last month. These are strong numbers!

There are many parallels between the Vancouver real estate market and the American stock markets. Both seemed disconnected with economic realities. The economic conditions now must be worse than conditions before covid-19 in January of this year. However, both the markets are now priced at a higher level than the start of the year.

 It is entirely possible that people are looking past covid, expecting it to be over soon and everything will be back to normal. However, if this is true, they are overlooking the economic impact that has yet to hit. The mortgage arrears and permanent business closures have not yet begun. As you can see from the graph below the Bank of Canada expects mortgage delinquency to start to pick up in October.

The other possibility is that people are betting on the government to keep on pumping money into the system to prop up the market. The real estate market in Canada represents a significant part of the GDP, but can the government continue to flood the market with cheap money? Right now people are betting with their wallet and they are saying yes to Vancouver real estate.

The post August 2020 Vancouver Real Estate Review first appeared on John Chan Mortgages.