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Market Updates
Real Estate Market Intelligence 2025 Overview
Hope your New Year is off to a wonderful start. In summary, 2024 was a year nothing short of up's and down's, with the year started off strong but fell flat since the summer. For the second half of the year, it gave up all the price gains it made, and ended up near where it started. On the bright side, the year ended on a high note with elevated sales. However, the overall total sales of the 2024 was also nearly flat (compared to 2023), and ended again at 20% below the 10-year sales average. To cap it off, 2024 was another year of roller coaster ride. Looking ahead, I believe 2025 will be an even more volatile year. Here are the emerging trends to observe: 1. More affordability with lower rates and increased amortization (for first time buyers)2. End Users remain the market's main driving force3. Single house and townhouse market will outperform condos4. Distress sales will grow as insolvency rises5. Retail investor remain sidelined and seek alternative options6. Rental rates drops further as immigration head to net-zero next two years7. Projected annual price growth at 1.6% Observation 1: More Affordability with Lower Rates and Increased Amortization (for first time buyers) Canadian major banks are predicting that the Bank of Canada will slash rates in the range of 0.25% to 1.25%, effectively making the policy rate ranging between 2% to 3%. While that is a huge gap for experts to predict, the core belief is that more affordability is on its way. However, keep in mind that policy rate does NOT equate bank rates, as we have been seeing in the past 2 weeks that the 5 year bond rate is slowly creeping up, causing some mortgage rates to rise. This has caused further confusion among Buyers. Overall, lower rates compounded with federal policy of increased amortization (for first time buyers), more buyers more likely to come out of the woodwork. Key is, would there be abundant supply (like that of 2024) to keep the market balanced. Observation 2: End-User Remain the Market's Main Driving Force Whether it is a growing family with a newborn on the way, or a retiree looking to explore options as a snowbird, the 2025 market look to continue to be dominated by end-users meeting their actual needs and demands, over those looking to purely invest. There will be more local demand driving local markets. Observation 3: Single House and Townhouse Market Will Outperform Condos For decades, the Vancouver single houses have been bought and rezoned into townhouses and condos. While that is profitable for developers, Buyers still yearn for more space, and their ultimate goal is still upsizing to a bigger home. With single house a dying breed, its supply remain constrained. Such Sellers (who have baked enough equity in their home) can sell on their own terms and timing, all the while with deeper pockets and less restraints. On the other hand, more new construction condos are poised to be completed (and flooding the market) in 2025 & 2026. This will place further price pressure on the condo resale market. As for townhouses, it remains to be the perfect blend between the two and the most sensible and affordable choice for growing families. If scarcity defines price, then single houses and townhouses are your best bets in the years ahead. Observation 4: Distress Sales Will Grow As Insolvency Rises Since 2022, the perfect storm has been forming with higher interest rates, higher wages, and weaker economy. As Canada's insolvency just hit a 15 year high, what can pile on to the misery is the pending US tariffs. Even with a slight bump up in tariffs, the Canadian economy would have to suffer higher inflation and higher unemployment. Remember in Sept 2024 that another developer, Thind, had gone bankrupt and was placed under receivership of $302 million? Expect more of the same this year. Observation 5: Retail Investors Remain Sidelined and Seek Alternative Options"Mom and Pop' investors will be looking away from investing in real estate due to the BC government's increasingly over-controlled tenancy laws. As these regulations continue to strip away the landlords rights, it has become an uphill battle for any landlords to sell (i.e 4 month notice to end tenancy). Rising costs (strata fees, repairs), market uncertainty along with all the headache and sleepless nights just isn't worth it anymore for mom and pop anymore; they'll explore easier alternative such as stocks, mutual funds or REIT. Observation 6: Rental Rates Drop Further As Immigration Head to Net-Zero in the Next Two Years The rise and fall of rental rates have historically coincided with immigration and unemployment rate for decades. Since April 2022 to Dec 2023, Canada has absorbed over 1.5 million immigrants, composed of temporarily workers, international students and permanent residents. As the federal government slammed the brakes on immigration on Oct 2024, compounded with unemployment rate near 7%, one can argue that residential rental vacancy will rise as the rental rates will fall. For 2025, the best case scenario for rental rate would be remaining flat. However, it would be more likely to see further rent rates drop as more condo inventory (i.e pre-construction completed) come onto the market later this year. Observation 7: Projected Annual Price Growth at 1.6% 2025 is poised to be a another year of volatility, so it is that much harder to do any projection. In my opinion, real estate, stripped away the investors and dominated mainly by end-users, will have a nearly flat price growth of 1.6%. Key factors to consider are the Canadian economy, which remains weak despite more incoming rate slashes. Higher unemployment rate may around 7% will cause most people to be more concerned about their job security, staying afloat and putting food on the table, rather than getting a new home. Downsize Risk:Sales slow further and dip between 25-30% below 10 year average if the Canadian economy deteriorates further due to tariff war. Double whammy of high unemployment rate with rising inflation. Canadian dollar tanks further. Upside Risk:Sales pick up drastically as Buyers respond to lower rates. First time home Buyers and other end-users finally come of the woodwork having waited for over two years of elevated interested rate. Demand eclipses supply, and minor price gain follows. While on the backdrop of the Canadian dollar tanking, some retail investors may consider returning and crowding the real estate investment market, in an attempt to hedge the falling loonie. Download December 2024 Real Estate Market Report Here are the in-depth statistics for the year 2024 - Prices has remained nearly flat at -0.1%, with the first half of the year registering +3% gain, before pulling back -3.1% to end the year. - Total sales for the year was 26,561 units, almost nearly flat as well at +1.2% from 2023. - Last year's sale total was 20.9% below the 10 year annual sales average. - Total number of properties listed was 60,388 units, which was 5.7% above the 10 year annual average.
Real Estate Market Intelligence November 2024
Real Estate Market IntelligenceNovember 2024 Winter was off to a wild start: jumbo rate cuts, BC provincial election, US election, and Canadian dollar depreciation. The past few weeks was certain filled with surprises (whether pleasant or not), and the Vancouver real estate market was in for the ride too. In what is a non-seasonal trend, October's real estate sales shot up significantly as Buyers suddenly turned optimistic (possibly due to the jumbo rate cut and pent-up demand). In fact, last month registered +31.9% more sales than the previous month, and is the 3rd highest monthly sales volume for 2024 only behind April and May. So have we finally turned a corner and heading towards recovery? One month doesn't make a trend, but we are starting to see stale listings (i.e homes that's been on the market for many months) that are getting sold, and lowball offers are vanishing. These could be signs that a market recovery is on the way, but with caution. Note that the October sale has increased, but it is still -5.5% below the 10 year average. Also, the total inventory is still +26.2% over the 10 year average. What this means is, some segments have shifted from a Buyers market back into a Balanced market, and from Balanced to a Sellers market, and we are still in an environment where supply is outpacing demand. The theme for the this year has been the weak Canadian economy, with rising unemployment and negative growth for per capital GDP (less productive per person). As mentioned before, if Canadian are worried about their jobs, if they get fired, if their work hours are reduced, or if they get get a bonus, then real estate is really just an after thought. The recent reform in immigration policy, where we were initially projected to have 500,000 permanent residents and "unlimited" temporary workers, has been cut to 390,000 permanent residents and hitting the brakes on the temporary workers together from 2025-2027. Canadian government has projected there will be -0.2% population growth in the next two years. Whether we like it or not, this complete U-turn in immigration will have a major aefect on the Canadian economy. In my opinion, had it not been for the immigrants to artificially prop up the Canadian economy in the past 2 years, we would've been in much deeper recession than we are now. Having said that, the provinces that gets hurt the most will be BC and Ontario, with the most temporarily workers representing 9.3% and 8.5% respective of the entire Canada. With the possibility of net outflow of people (the most significant in BC and Ontario), we should see rental rates drop further. When that happens, would the landlords, seeing less return on their investment condos in these two provinces, decide to liquidate their investments and possibly flood the market in next 2 years? Keep in mind that there are also plenty of pre-sale projects that will be completing in the next 2 years. Thus, we should be seeing the condo/apartment segment having an abundant supply in the future. Simply look at Toronto now, which is the epicentre of the condo market crash, and one can observe the rise and fall of an over-leveraged and over-supplied condo market. Moving forward, there is simply too much market volatility to even predict what's going to happen even three months from now. One thing for certain is that the Canadian economy is going to need time to recover and to stay competitive. With more imminent rate drops, the Canadian dollar (compared to the USD) has further tanked to its lowest point in the past 4 years, and we may see further dips. As such, Canada's biggest trade partner, the US and their economy, will be heading in the other direction and out-performing many other nations. With the economic and production gap widening between the two countries, Canada will try to avoid to importing the inflation from the US. If your investments portfolio is highly invested in Canadian funds, it would be highly advisable to explore alternatives aboard. Meanwhile, let's buckle our seats: there will be more turbulence ahead. Some of the unique trends I've been observing:1. Last month's Vancouver Real Estate saw a pleasant uptick in sales (+31.9% over September), and is the third highest transactional month since April and May. However, sales still remain -5.5% below the 10 year average. Also, total inventory remains elevated at +26.2% above the 10 year average. Some products are shifting from a Buyer's market back into a Balanced market. However, there remains downward price pressure, with last month's average price dropping -0.6%. Single house was the under performer, registering monthly loss at -1%. On the flip side, townhouse was the outlier with the price gain at +0.9%. Apartment was the mid pack at -0.6%. 2. Facing more political pressure, the Trudeau government made a complete U-turn on the immigration policy. In short, there will be a stoppage in importing temporarily workers, and there will also be a net outflow of immigrants. The projected Canadian population growth will be -0.2% in the 2025-2027, which is a first negative population growth for Canada outside of the pandemic. An interest fact was that this announcement was made in October, but three months earlier in July, Statistic Canada has shown that permanent resident application had already fallen by 57%. In other words, potential immigrants were already NOT considering coming to Canada, possibly due to the high standard of living, the lack of housing affordability and the weak economy. The recent revision by Immigration Canada was just to reaffirm that fact. Either way, Canada is no longer an ideal immigration country anymore. 3. According to a report by Desjardins, Canada's budget deficit could balloon to $46.5 billion in 2024-2025. On a provincial level, the Metro Vancouver Board has approved a +25.3% increase to regional tax bill. In other words, British Colombians are whooped both on a federal or provincial level. As more and more taxes are ready to be piled into the Canadian families to "solve the problem", just how are they suppose to improve the living standards of Canadians? In fact, studies have shown that more taxes are counter-productive and would further drive away innovations, investors and business start-ups. I can only imagine what our next generation's tax burdens would be like. 4. With Trump winning the election, the attention now turns to his policies, namely the tariff he promised to imposed. As such, Canada does 77% of it's trade with the US, and imposing a 10% tariff would translate into a $30 billion per year impact as report by the Canadian Chamber of Commerce. 5. If lower rates were a drug, then the consumers are the addicts: Canadian consumer confidence is now at a 30 month high. Cautiously optimistic, anyone? 6. Buyer sentiments is a funny thing. Even when the Bank of Canada had the jumbo rate cut of -0.5%, one will have to understand that actually had no effect on the fixed rates. Keep in mind that only variable rates are affected in the event of a rate cut/hike, but not for fixed rates. In fact, the 5 year fixed rates (which is determined by the 5 year Canada bond yields), have risen by +0.4% in October. In other words, fixed rates gone UP, variable rates gone DOWN, which means, in some case, borrowing costs have gone higher! Buyers coming off the sidelines with the sole belief that mortgage rates are "cheaper", may only be in for a rude awakening. It is very possible that we may see fixed rates remain the same in the near term. Here are the 4 highlights for October:- Total inventory of 14,477 units has remain nearly the same as last month. It is still the highest for the month of October since 2014. - After months of dismal sales, the October sales saw a pleasant surprise uptick of 2,632 units, which is +30.2% over September. Some of the stale listings actually sold last month. - The jumbo rate cut may have got some Buyers off the sidelines, but keep in mind that one month doesn't make a trend. Could November be another month of surprise? - October home monthly price drop slowed to -0.6% (compared to September's -1.4%). Further rate cut may see the negative price growth level off, and possibly head into a flat territory in the next few months. The two key factors are: would sales keep up, and would inventory level remain elevated. Here are the in-depth statistics of the October: - Last month's sales were -5.5% below the 10 year September's sales average.- Month by month residential home sales surged to +30.2% from September 2024.- Month by month new home listings dropped by -12.7% compared to September 2024. - Last month's price dropped slowed to -0.6%, compared to -1.4% from September.- Sales-to-listing (or % of homes sold) ratio is rose significantly to 18.8%. (compared 12.8% in September). By property type, the ratio is 13.4% for single houses, 22.5% for townhouses, and 22.2% for apartments/condos. Download October 2024 Greater Vancouver Real Estate Report Single House Market Last month, the single house market was a mixed bag. The welcoming news was that month-over-month sales was up significantly by +25.6%., bu on the other hand, the single house monthly price drop at -1%. This mixed signal shares the same polarizing views of the Sellers and Buyers. Even with the recent uptick in sales, we are simply going from a slow market to a normal market. It was far from crazy and with hardly any bidding wars. The most noticeable effect was that Buyers sentiments have returned after having ghosted for nearly the entire summer. The Sellers, who are serious and motivated, was able to get their home sold before the new year. Even though there is a rise in showing requests, the open house traffic is still sub-par. Key is, the single house market have shifted back to a balanced market after spending the past 3 months in the Buyer's market. This shift has caused some uneasiness and adjustment with the Buyers, as their low ball offers (which was plentiful in the summer) is no longer considered now by many Sellers. Noteworthy is the single house inventory in back in a balanced market, and what remains to be seen is if it can stay there. The historical trend for the recent years for single house Sellers mainly support the theory they are focused on the supply side of the equation. Theoretically, this has put a price floor for this market. However, this year was different as inventory was plentiful (for the summer). Pockets of neighorhood, such as North Vancouver and Cloverdale, are seeing hot trends of sales-to-listing ratio (% of homes sold) at 25% and 31% respectively (Seller's market), even though we saw North Vancouver monthly price dropped -3.4%. On the flip side, West Vancouver and Vancouver Westside have sales-to-listing ratio at 6% and 10% respectively (Buyer's market). It does look like the average single house neighborhoods (under $1.6m) are performing fine, while the premium home neigborhoods ($3m+) market remain subdued. Would the recent uninsured mortgage limit increase from $1m to $1.5m further boost the single house segment? I'm a bit skeptical on that. Questions is, can a regular Canadian family can stomach the hefty monthly mortgage payments of these high (95%) loan-to-value ratio Buyers, in the face of a Canadian economic downturn?For the month of September, the neighorhoods that registered most price growth were Pitt Meadows, Burnaby South, and Port Coquitlam at +5.4%, +4.1% and +2.7% respectively. Conversely, the neighborhoods registered the most significant price drops were Tsawwassen, Port Moody, and North Vancouver, with -4.8%, -4.1% and -3.4% respectively. The single house market have moved back into a Balanced market, with average days on market nearly flat at 38 days (compared to 39 days in September), and month-to-month average price continue to slip at -1% (compared to -1.3% in September). Sales-to-listing ratio (% of homes sold) edged up to 13.4%. (compared to 9.1% in September). Townhouse Market The townhouse market is the only segment that saw a price growth of +0.9% last month (compared to single house -1% and apartment -0.6% respectively). Not surprisingly, the townhouse market likely benefited from the upswing in apartment sales. When an apartment owner who just sold and is looking to upsize, the most sensible choice to climb up the property ladder would be buying a townhouse. By the same token, this ripple effect "should" also tickle into the single house market, but in that segment the effects are lessened. Much like the single house segment, the townhouses that was stale (listed for over 45 days) were also starting to sell. Meanwhile, monthly total inventory was holding steady -4.6% (given seasonal adjustments). This has shifted the townhouse segment from a Balanced market to Sellers market. As I've mentioned before, townhouses has a history of being the easiest to adjust to market upswings due to its nature of the "next best thing" in terms of affordability to a single house. When we combine that with historically limited townhouse supply and elevated brand new townhouse prices, again this has created a price floor for resale townhouses. Noteworthy is that price is always a lagging indicator, and when there are more sales and less inventory, price tend to firm up quickly, but may not reflect so until 2-3 months from now. With boots on the ground, I am seeing Seller's getting firmer and firmer on their prices. Again, entry level townhouses priced under $1m in core Burnaby, Richmond, and North Vancouver are getting much more action and selling faster than other products. As for Fraser Valley such as Surrey and Langley, their newer townhouses (less than 5 years old) that priced under $900k are also moving fast. There are signs that some Buyers want to be ahead of the curve and get in before the new year. Would townhouses be the first segment to recover? In my opinion: highly likely. In October, the areas with the most townhouse price growths were North Vancouver, East Vancouver and Whistler, registering +7.4%, +5.5% and 4.2% respectively. Conversely, the neighborhoods with the negative price growth are Coquitlam, Maple Ridge, Pitt Meadows, at -3.5% and -2.2% (tied for 2nd & 3rd) respectively. The townhouse market shifted from a Balanced market to a Sellers market, with average days on market remaining dropping slightly at 28 days (compared to 29 days in September). Month-to-month sale price improved by +0.9% (compared to -1.8% in September). Sale-to-listing (% homes sold) ratio remain the best among all segments and edged up significantly to 22.5% (compared to 16.9% September). Apartment and Condo MarketThe apartment market saw a huge spike in sales in October, posting a monthly +32.7% gain, which is the best in all segments. Most of the first time home buyers, who have waited for a good part of the summer, has finally come off the sidelines and landed on their home. As we mentioned, Buyer sentiment is a funny thing. Even when the Bank of Canada has dropped rates by 0.5%, the major bank's rates have actually gone UP. So in fact, Buyers who purchased did not get a cheaper rate, and the "rush" was largely psychological and more in the line with the herd mentality. Either way, it was definitely a positive change of winds for the much needed apartment scene. The reasonably priced apartments under $500-$600k are showing signs of increased traffic and offers. However, collapsed offers are still happening. Some Buyers, whether they are overstretching beyond their financial means or simply decided to hold off till Spring, are causing elevated inventory level at it's highest month of October in since 2020. Noteworthy is that are a tidal wave of pre-sale apartment pending to be completed in 2025. As such, these newly finished apartments will inject even more supply into the market. Worst yet is that many of the pre-sale Buyers & investors will still face a higher interest rate than they'd like. The math just doesn't work for them to rent out (bleeding negative cash flow monthly) or to cut their losses (take a minimum $100k loss and walk out). Keep in mind that in either case, these investors confidence are shaken and they will not be returning anytime soon. Thus, I think the pre-sale scene would face an uphill battle for at least the next 2 years. Overall, the apartment market should hoover around a balanced market in the near future. For the month of October, the best performing neighbourhoods for apartments are Pitt Meadows, Maple Ridge and Tsawwassen, at +6% & +5.6% (tied for 2nd and 3rd) respectively. Conversely, the areas with the most significant price drops were New Westminster, Vancouver East and Sunshine Coast, with -3.2% (tied for 1st and 2nd) and -2% respectively. The apartment and condo segment has popped back up into a Sellers market, with average days dropping slightly to 33 days (compared to 31 days in September). Month-to-month sale price maintained the slightly negative trend at -0.6% (compared to -0.8% in September). Sale-to-listing (% homes sold) ratio shot up significantly to 22.2% (compared to 14.6% in September). Here are the Three Trends I'm Observing: 1. Grand ClosingCanadian businesses are struggling, and it really shows in the latest report that September had the third highest business insolvency in the past 40 years. From higher unemployment rate to restaurants going out business, this downward spiral is hurting the Canadian middle class the most. Behind every job or business loss is a hurting family scrambling for food on the table to missing a mortgage payment. What's worrying is that this may get worst before it gets better. (Source: OSB, Better Dwelling) 2. Reverse PsychologyCanadians breathed a sigh of relief that Bank of Canada had a jumbo rates cut of 0.5% last month. Real estate Buyers were eager to move into the market because of the rate drop, right? In reality, one needs to understand the difference between Overnight rate (set by Bank of Canada) and bank rates (set by the major banks). Simply put, banks look at bond yields to determine their fixed mortgage rates. As such, the most popular 5 year Canadian bond yields have actually gone up +.30% since the beginning of October. Thus, contrarily to the common belief, the bank rates have edged UP, while overnight rate has gone DOWN. The truth is that it costed the Buyer MORE to buy in November than in October (yes it sounds odd). Regardless of these fact, we know that buying is mainly psychological. If real estate Buyers thinks rates are cheaper (but in fact they're not) but it's a good time to buy, then they'll just dive right in, which is what happened last month in Canadian real estate. (Source: CNBC) 3. Sorry Not SorryIn a nearly unbelievable turn of events, Trudeau's government made a complete U-turn on the immigration policy, seeking to drastically reduce immigrants and will be seeing a negative population growth of -0.2% in 2025-2027. So Canada will have less people, lower rent, less consumption, while there will be more pre-sale apartments to be completed soon. All this spells dis-inflationary. Perhaps this makes a good case for Bank of Canada to further lower interest rate? (Source: Bloomberg)
Real Estate Market Intelligence October 2024
Real Estate Market IntelligenceOctober 2024 Fall has fallen and the wreath of foliage has adorned the streets. As the weather turns much cooler, the Vancouver real estate experienced a phenomenon of the decade: last September had the highest inventory (14,496 units) for the month since 2014. It was also +16.7% above the 10 year average. At the same time, despite the Bank of Canada continual rate cuts and the US Feds jumping onboard with a jumbo 0.50% cut, it has still failed to reel Buyers off the sidelines, with the September sales coming in at -26% below the 10 year average. As the opposing forces continue to pull harder, so the market continue to stretch with Buyers and Sellers views polarizing further. This may seem puzzling but when we look back only a year ago, in 2023, the Vancouver real estate market was in a under-supplied market, and at one point the inventory was the lowest in 20 years. Rate were elevated back then, but Sellers weren't selling. Fast forward to now, we have a healthy housing supply and highest inventory in a decade, yet Buyers aren't buying. Confusing? Indeed, and I think the answer is multi-fold. Firstly, the typical Canadian real estate prices has had a long history "going up fast, coming down slow." This mainly has to do with Sellers motivation, whom have purchased 5, 10, or 15 years ago, and they have built enough equity into their home that they can weather any short term downfalls. I've reiterated before that these Sellers sell when they want to, not because they have to. As for Sellers (or investors) who have to sell, they may be an estate sale (inheritance) who are looking to cash out, or over-leveraged investors who can no longer hold on. Thus, the prices on the way down is usually sticky. Secondly, the lagging effect of interest rate cuts / hikes are taking much longer to filter through the economy. Back in 2022-2023, most economist predicted that higher interest rates would cause inventory to rise. That didn't happen. Sellers were patient as some of them had locked in their rates. Again, fast forward to now with rates coming down, and most economist predicted that second half of 2024 real estate market would pick up as lower rates would spur activity. Now that didn't happen either. In fact, we saw the exact opposite. Ever since the pandemic, many traditional prediction methods are off, and more contrarian theories arise. Thus, it is possible that the prices may be flat for the next 12 months due to the healthy supply, and Buyers may still not come off the sidelines as prices remains elevated and affordability remains weak, despite rates dropping further. Thirdly, the Canadian economy is still weak, with unemployment rate at 6.6% (and rising), and 1 in 20 Canadian business have shut down (worst since pandemic). If the average household is concerned about keeping their jobs and putting food on the table, then real estate is really just an afterthought. As we edge towards the end of the year, and with two more rate cuts on the horizon, just how much these cuts will move the needle in real estate? I believe it won't have too much of an effect based on recent statistics and trends showing sales trending around -26% below 10 year average. For Sellers, most were optimistic about next Spring, but again what if the prices remain flat till then? For Buyers, perhaps the true question remains around affordability, and unless a huge price correction occurs, some will remain on the sidelines no matter how deep the rate cuts are. With the latest September inflation rate coming in at 1.6% (mainly driven by lower gasoline prices), all indicators now point to the Bank of Canada's anticipated rate cut of 0.5%. Let's see. Some of the unique trends I've been observing:1. Canadian business are shutting down at a frightening speed, with seasonally adjusted data showing 46,354 business closed in June. This is the largest scale of business closure since the pandemic in 2020. What is more worrisome is that business closure and unemployment rate tend to have a downward spiral effect. For example, when businesses close, unemployment rate goes up. People spend less as they lost their jobs, and causing more businesses to close. Are rate cuts the answer to help Canadians climb out of this hole? 2. The US Fed's jumbo rate cut of 0.5% in mid September has surprised many (myself included). Structurally, the US is in a much better condition than Canada, and for them to cut 0.5% most likely mean they already see financial cracks (possibly global) that is deteriorating at a faster pace than expected. Having said that, the currency devaluation (increasing money supply and lower value of cash) is spurring the NASDAQ to hit all time high recently. It would be interesting to see if real estate be the next investment option. 3. In another political move, the Canadian government has increased the uninsured mortgage limit from $1m to $1.5m, and also expanding the 30 year amortization period to first time home Buyers. Just when the government is saying they are helping young families with affordability, keep in mind that this "uninsured" mortgage limit increase will most likely get the Buyers' parents to co-sign on it, and not the mention the high monthly mortgage payment that will sure cripple the family's spending. The government is encouraging those to risk it all to own a home, while having a hard time putting food on the table. Binge on debt, they recommend. Simply put, the true solution to providing affordability is providing more new housing supply and not further stoking demand. 4. Much in line with the trend in the past few months, the September Vancouver real estate market continue to face more supply (+16.7% above 10 year average) and substantially less sales (-26% below 10 year average.) Last month's sales count was the lowest of the year since January 2024, and is the fifth consecutive monthly decline. Detached homes sales were performing the worst, with condos and townhouses following. In general, the Greater Vancouver market fell into a Buyer's market for the first time since April 2020 (pandemic shutdown), with 8.1 months of inventory. Detached homes make up most of that scale, with 11.4 months of inventory. Apartment and townhouses segments are considering in a balanced market. 5. The Canadian rental market saw the slowest growth since October 2021, at +2.1% year over year. This was mainly attributed to less foreign students now (half from record high) and the stoppage of temporarily working permit program. Ontario and B.C had the most significant annual rental decline, at -9.5% and -8.1% respectively. Contrarily, the annual asking rent in Saskatchewan surged +23.5%, making it the fastest growing province in Canada. 6. The latest September inflation came in at 1.6% and was mainly driven by lower gasoline prices. While this downside surprise was welcoming to many, keep in mind that other indicators of underlying price pressure were held steady. Also, the Canadian dollar took a hard hit (steepest drop in 7 years) from the weak economic data. Tread carefully. Here are the 3 highlights for September:- Total inventory has spiked to 14,496 units, which was the highest for the month of September since 2014. - September sales of 1,838 units was another dismal month, and is the worst for the moth of September since 2018. - The surge in inventory combined with weak sales has been a steady trend since the summer. This seems poised to continue into the fall and possibly winter. - September home price saw the most significant annual monthly price drop, at -1.4% (August's price drop was -0.1%). If September was an indicator of what the remaining of the year has in store, then we will most likely see further price drop, and possibly accelerating at a faster pace. Here are the in-depth statistics of the September: - Last month's sales were -26% below the 10 year September's sales average.- Month by month residential home sales remain nearly flat at +1.1% from August 2024.- Month by month new home listings surged by a whooping +33.3% compared to August 2024. - Last month's price dropped of -1.4% was the most significant monthly drop for the year. (compared to -0.1% from August) - Sales-to-listing (or % of homes sold) ratio is dipped further to 12.8%. (compared 14.3%% in August). By property type, the ratio is 9.1% for single houses, 16.9% for townhouses, and 14.6% for apartments/condos. Download September 2024 Vancouver Real Estate Market Report Single House Market Last month, the single house market feels like it's at a standstill, with sales ratio (% of homes sold) dipping further to 9.1% (compared to 9.6% in August). Monthly price took the biggest plunge of the year at -1.3% (from -0.1% in August). Typically, September is the month where Buyers return to the route and may resume their buying/selling plans. Contrarily to the traditional trend of increased sales in September, we saw sales nearly flat at 518 units (compared to 512 units in August). If summer was dull market, then the fall market for single house looked like a continuation of that. More importantly, the Buyers and the Sellers are moving further apart on price evaluation. For example, even when the Seller's (and their agents) are proactive in pricing their home BELOW their previous similar sold price (for example, a month ago), offers are still coming even lower. This has created this new reality for the Sellers, where they have to continually chase the downward market to make a sale happen, and they feel like they are losing as the months go on. As mentioned, most single house Sellers whom have bought 5, 10, 15 years ago have accumulated enough equity in their home that they do no need to fire sale. Some may choose to hold off till next Spring, where activities may pick up. However, it is also very possible that price may just stay flat till next Spring, albeit there would be more traffic. In other words, the difference is the same. If the fall-winter trend of over-supply continues for single house, I would expect the negative price growth to pick up. The Canadian's government latest program of increasing the uninsured mortgage to $1.5m may spur activities for single houses priced under that. However, keep in mind that in the Greater Vancouver area, there is very slim pickings for these homes priced under $1.5m, but the Fraser Valley such as Surrey and Langley has much more selection. This program may drive up the demand and price of entry level single houses in affordable neighbourhoods in the Fraser Valley, while the affluent neigborhoods like Vancouver Westside will see little change. For the month of September, the neighorhoods that registered most price growth are Ladner, Bowen Island, and Port Moody, at +3.1%, +2.8% and +1.8% respectively. Conversely, the neighborhoods registered the most significant price drops are Burnaby South, West Vancouver and Pitt Meadows, with -4.3%, -3.3% and -3.2% respectively. The detached home market continue to dip into the Buyer's market, with average days on market further slight improved to 39 days (compared to 41 days last month), and month-to-month average price took the biggest hit of the year at -1.3% (compared to -0.1% in August). Sales-to-listing ratio (% of homes sold) slipped further to 9.1%. (compared to 9.6% last month). Townhouse Market For the past few months, the townhouse market has continue to lead the charge in negative price growth, and in September it was no different as it took a -1.8% hit (again the most significant monthly drop for the year.) The ironic thing is, even though September's month-over-month townhouse inventory was nearly flat at +0.9%, the prices came down the most. Underneath the surface, the townhouse has the lowest days on market (29 days), compared to single house and apartment (39 days and 31 days respectively), and the least number of active listings (2,241 units). The townhouse stats do look like the strongest segment of all, but deep down, I believe that its prices are already out of the reach for most Buyers. This is especially true for the Greater Vancouver area, with average townhouse price at $1,099,200. For the same reason, many Buyers are choosing to scoot over to Fraser Valley, where average townhouse price is much more affordable at $834,400. For young families (such as those who just had a baby), the decision to move out to the Fraser Valley is much more financially logical. They can make a lateral movement from selling their Vancouver condo and adding less than $100k to upsize to a Fraser Valley townhouse. I still believe that Greater Vancouver townhouse, which once was dubbed the "next best thing" besides a single house, is simply facing a short term phenomenon. I am a believer that the pent-up demand for townhouse is there, just that once the market activities pick up (whenever that would be), this segment would likely be the first to take off. In September, the areas with the most townhouse price growths were Maple Ridge, Burnaby North and Richmond, and registering +0.8% & +0.5% (tied for 2nd and 3rd) respectively. Conversely, the neighborhoods with the negative price growth are Port Coquitlam, Vancouver East, and North Vancouver, at -5.5% and -5% and -4.3% respectively. The townhouse market stays in a balanced market, with average days on market remaining flat at 29 days (same as last month). Month-to-month sale price dipped further by -1.8% (compared to -1.2% last month). Sale-to-listing (% homes sold) ratio remain the best among all segments but dropped slightly to 16.9% (compared to 181% last month). Apartment and Condo MarketThe apartment market is easily the stickiest market now, despite its had the least monthly price drop (-0.8%) compared with other segments. This past month's stats are partly skewed due to the fact that highest monthly price growths were all in the outskirts (Squamish, Sunshine Coast, and Whislter at +13%, +12.3% and +11.7% respectively. If we strip out the outskirts, the Greater Vancouver area apartment market does feel much weaker. In nature, the apartment market is where end users and investors come together. However, in the current environment where investors are far and few between, and end users are still staying put, the accumulation of medium to luxury condos have driven to a Buyer's market and have further downward pressure on the prices above $800k. However, the entry level apartments between $500-$600k are still popular and stays in a Sellers market. As the Canadian economy trails down the weaker path, the Vancouver condo market will continue to be polarized. Have a look at Toronto, where it's currently the epicentre of the condo storm. In 2022, a report by Statistic Canada stated that 2 out of 5 (38.9%) are investments, and in Vancouver it is estimated 1 out of 3 (34.2%). Based on that, the investors who bought a pre-sale back in 2022 are now getting 15-20% less in market value. Their cash flow is now negative, and if they sell, they may have to take a $100-$150k loss. Even when the interest rate start to come down, these inventors are emotionally damaged, and it may take some time for them to return. It is also equally possibly that they may never return. Either way, the apartment market is now highly driven by end users, and as the investors are "cleansed" from this market, it awaits to be seen how the inventory will play out in the next few months. I believe there will still be more negative price growth in store, especially in the medium to higher priced segment. For the month of September, the best performing neighbourhoods for apartments are all in the outskirts, in Squamish, Sunshine Coast and Whistler, at a whooping +13%, +12.3%, and +11.7% respectively. Conversely, the areas with the most significant price drops were Tsawwassen, Ladner, and Coquitlam, with -11.4%, -11% and -2.3% respectively. The apartment and condo segment has slipped further down but remain in a balanced market, with average days dropping slight to 31 days (compared to 35 days last month). Month-to-month sale price growth remained flat at -0.8% (compared to a flat 0% last month). Sale-to-listing (% homes sold) ratio remained dipped slightly to 14.6% (compared to 17.2% last month). Here are the Three Trends I'm Observing: 1. Cold SummerFor the summer and the past three months, the Greater Vancouver market saw sales trend that were nearly -26% below average. Coincidentally, inventory is at its highest level since 2019. Many had predicted that lower rates should rekindle demand. However, that has yet to show in the current market. As we know that it takes time for any monetary policy (i.e rate cut) to filter through the economy, just what if lower rates continue to fail to entice Buyers to come off the sidelines? Would lower sales persist for the another 4-6 months? (Source: BCREA) 2. Loonie TunesAfter reports of weaker economic data and consumer spending, the Canadian dollar is set for its worst run of losses in 7 years vs. the US dollar. No matter it's gas, stocks, or real estate, there seems to be barely anywhere to hide from the heightened volatility on a global level. (Source: Bloomberg) 3. Shrinking Middle Both globally and in Canada, the gap between the rich and the poor is widening at an alarming rate, with Canada at its highest in 25 years. Ever since the pandemic, Canada's middle class is shrinking and we are heading towards a polarized society with the extreme rich and the extreme poor. No wonder many Canadians are upset with the government. (Source: Statistic Canada, Better Dwelling)
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