Rate cut could add fire to Vancouver and Toronto housing markets

July 13th, 2015

Sales — and prices — have hit new records in both Toronto and Vancouver this year.

A further interest rate cut by the Bank of Canada could further fuel flames in the country’s two biggest real estate markets which are once again showing signs of overheating, housing watchers say.

“It’s another log on the fire for the Toronto and Vancouver housing markets,” says economist Sal Guatieri, vice president of BMO Economic Research, who expects to see a cut next week in an attempt to kickstart lagging growth.

“It’s not the amount that matters — the reduction in borrowing costs will be quite minimal — it’s the message it sends to homeowners and potential buyers that rates are going lower rather than higher and will almost certainly stay low for quite some time. That just encourages more people into the market.”

Both of Canada’s priciest cities are already swamped with far more buyers than properties for sale.

Sales — and prices — have hit new records in both Toronto and Vancouver this year. The frenzy has been driven by low interest rates, an ongoing shortage of listings and a growing sense of panic, especially among first-time buyers, that if they don’t get in now, they will be locked out of the market forever, particularly the low-rise house market.

“We are becoming concerned again about the possibility of a housing bubble in Toronto and Vancouver because prices are rising so much faster than incomes and because interest rates are continuing to fall rather than go up,” says Guatieri.

“We were much more comfortable a year or two ago when both markets seemed to have cooled off a bit and prices were rising more moderately.”

Both Toronto and Vancouver set new sales records for the month of June.

Almost 12,000 houses and condos changed hands last month across the GTA, up 18.4 per cent from a year earlier. The average sale price of a detached house was $816,583 – and over $1 million in the City of Toronto – up 14.3 per cent year over year.

Greater Vancouver’s 4,375 sales were up 28.4 per cent for the same period. The average detached house was $1.45 million – and a staggering $2.39 million for a stand-alone house in the core City of Vancouver – up 20.2 per cent from June of last year.

Condo sales skyrocketed in both regions, up 22.4 across the GTA and 35.6 per cent across Greater Vancouver, year over year.

All that demand helped push up condo prices 6.3 per cent in the GTA, to an average of $390,894, and up 5.6 per cent in Greater Vancouver to $479,450.

Last January’s surprise Bank of Canada rate cut to .75 per cent has been a contributing factor to those escalating sales and prices, says Penelope Graham, editor and spokesperson with mortgage comparison site RateSupermarket.ca.

A cut to .5 per cent, as is expected, would see the five-year fixed rate dip below the current low of 2.39 per cent and further boost the illusion of affordability, she said.

“There are more people now entering the market with just five per cent down, because that’s all they can afford. There is a real sense of urgency in the bigger markets to get in now, before it’s too late, and get in with what you have,” says Graham.

“That’s potentially putting people in a really vulnerable position in terms of their debt levels.”

Toronto realtor David Fleming says he’s seeing a surge in demand even for condos — especially under $400,000 — and younger buyers than ever, backed by low interest rates and help from their real-estate rich baby boomer parents who want only the best for their children.

“I’ve seen a serious culture change. Young buyers used to be 26 or 27 years old. They’d graduated university, worked for a few years and lived at home then rented and bought. Now buyers are cutting out those middle steps.”

He’s seeing first-time buyers as young as 22 determined to own rather than rent. And he’s hearing from people who stepped to the sidelines three or four years ago, thinking the much-talked-about bubble was about to burst.

Instead, they’ve watched prices climb further out of reach: Back in June of 2012, the average sale price of houses and condos combined across the GTA was $508,622. This June, the average sale price was $639,184.

Where the average sale price of a condo in the sought-after City of Toronto was $364,597 in June of 2012, last month’s average was $418,599.

That was up seven per cent just over June of last year as bidding wars and bully bids — long the hallmark of the highly competitive low-rise house market — have pushed up prices for well-located, unique or larger condos seen as sound investments and house alternatives for the longer term.

“That’s a testament to the froth in the house market,” says BMO economist Guatieri.

“So many people are now priced out, they have no other alternative than to get into the condo market, and that’s pushing up prices, even though there is ample supply.”

Apart from the oil-impacted markets of Alberta, Saskatchewan, Newfoundland and Labrador, Canadian house prices are holding up well and consumer confidence appears to be strong, even in the midst of growing talk about a possible recession.

“None of my clients are talking about the Big R word,” says Toronto-based mortgage broker Jake Abramowicz.

“They’re confident that rates will stay low for a very long time now and that the market — both condos and houses — will not correct anytime soon.”

Source: Susan Pigg, Toronto Star

This Canadian Real Estate Blog was brought to you by BestHomesBC.com. Looking for a home to buy in Vancouver? Check out BestHomesBC.com for properties for sale throughout British Columbia.

Price of a detached house in Greater Vancouver surpasses $1.1 million

July 6th, 2015

Last month was the highest selling June for residential property sales in Metro Vancouver.

Lower Mainland house prices hit record highs in June, particularly in Metro Vancouver north of the Fraser River, as hot spring sales appear to be spilling over into summer.

The benchmark price (an average of typical homes sold) for detached houses topped $1.12 million, the Real Estate Board of Greater Vancouver reported Friday, as overall sales through the Multiple Listing Service hit a June record of 4,375 units. That figure was 28-per-cent higher than last June and also the second-highest number of sales for any month.

In the Fraser Valley, overall sales were up 45 per cent at 2,413 units for the month in “the strongest residential market we’ve experienced since 2005,” and the fourth busiest month ever for the region, said Jorda Maisey, president of the Fraser Valley Real Estate Board.

It is a seller’s market when a sales are more than 20 per cent of overall inventory over a sustained period. In Greater Vancouver that figure was 36 per cent for June, and in the Fraser Valley it was 30 per cent.

“Demand in our detached-home market continues to drive activity across Metro Vancouver,” said Darcy McLeod, president of the Real Estate Board of Vancouver.

Price gains “are no surprise, given the fact that single-detached homes in Metro Vancouver are becoming a smaller and smaller proportion of the housing stock,” said Cameron Muir, chief economist for the B.C. Real Estate Association. “You have a growing population, more households bidding on a finite number of homes for sale.”

Notwithstanding the debate raging in the city over how much offshore capital is influencing property markets, McLeod said the REBGV saw “more detached-home sales in the region than we’ve seen during the month of June in more than 10 years.”

And looking back over 10 years, even with a dip in property values during the 2009 recession, pricing data from the real estate boards show considerable gains.

In Greater Vancouver, gains in detached-home prices have been 107 per cent in total since 2005. In the Fraser Valley, the gains were 63 per cent.

The picture for houses, however, is skewed by the top-end of the market — high-end house sales in central locations of Vancouver — said Robyn Adamache, principal market analyst for Vancouver at Canada Mortgage and Housing Corp.

In central locations of Vancouver, prices “are really disconnected from local incomes,” Adamache said.

Meanwhile, condominiums have not experienced anything like the escalation in prices that houses have.

Over 10 years, Greater Vancouver condo prices by June of 2015 were up 61 per cent. In the Fraser Valley, June prices were 36 per cent higher than they were as 2005 began.

However, pricing looks more stagnant when you factor in the 2009 recession. Adamache said condo prices in Greater Vancouver since 2010 were up just six per cent from their previous peak in 2008, compared with the 40 per cent that detached-house prices have risen from their previous peak.

“The number of apartments in (Metro) Vancouver doubled from 2001 to 2011, while the number of single-detached homes has remained the same, and in fact declined by about 1,000 units (over the same period),” said Muir.

“Apartment prices, essentially, over the past five years, have not grown much more than the rate of inflation,” Muir said.

In the Fraser Valley, condominium prices as of May had not regained previous peak levels compared with detached houses, Adamache said.

Speculation has also been noted as a factor driving prices higher, with Vancouver Mayor Gregor Robertson and condo marketer Bob Rennie calling for a special tax to discourage house flippers, but there is little hard data to prove that this is happening.

In May, the Sun reported on a flurry of 23 purchases in West Vancouver that were quickly re-listed for substantially higher prices, but Muir said available data suggests something else.

He said a recent analysis conducted by Central 1 Credit Union showed few flippers in the market compared to other hot markets in recent decades.

That analysis showed that in early 2015, about 10 per cent of sales were of properties that last sold within two years, compared with 30 per cent between 2006 and 2008.

Muir said “if you’re flipping $2-million, $3-million homes, that’s a pretty risky endeavour.”

Source: Derrick Penner, Vancouver Sun

This Canadian Real Estate Blog was brought to you by BestHomesBC.com. Looking for a home to buy in Vancouver? Check out BestHomesBC.com for properties for sale throughout British Columbia.

Could an interest-rate hike cool B.C.’s real estate market?

June 10th, 2015

If the Conference Board is correct in its latest prediction, things could become interesting in B.C. next spring.

Not “good” interesting. “Scary” interesting.

“We believe the Bank of Canada will begin raising (interest) rates in March 2016,” a new report from the Ottawa-based economic think-tank says, predicting slow and gradual rate increases thereafter.

The bank will be pressured to act in response to “inflation pressures (which) will begin to brew early next year.”

Clearly such a scenario could hit hardest in B.C. where home buyers have taken on big mortgages to deal with stratospheric property prices and where a low interest rate environment has added kindling to a red-hot housing market.

British Columbians are second only to Albertans in the average per capita consumer and mortgage debts they are carrying.

Could an interest-rate hike in March act as a bucket of cold water on consumer and real estate activity?

Could it finally slow down the bidding wars that have been driving property prices higher in a fiercely competitive market?

For those with both mortgages and large debt loads, the effect of any interest-rate increase will be “unambiguously negative,” says Blair Mantin, vice-president of bankruptcy trustee Sands & Associates.

Mortgage payments take priority in people’s budgets, he says, and so, “we might also see increased needs to restructure unsecured debts,” such as credit-card balances.

Mantin believes interest-rate hikes would trigger “a deflationary impact on house prices in the Lower Mainland.”

The only way that would not occur is if incomes were to rise in tandem. But that is unlikely because “when interest rates are increased to control inflation, the economy often cools and any upward pressure on wages would be relieved.”

The real estate and finance industries are highly influential in the Vancouver region. Yet the Conference Board does not forecast any slowdown here in either the housing or retail sectors.

“We have a favourable outlook for retail sales and the housing market in B.C. next year,” said Marie-Christine Bernard, the board’s associate director of provincial forecasting, “because even though interest rates start to gradually move up at the beginning of the year, we have strong economic growth boosting labour demand and household disposable income.”

Certainly, for now, says the report, “the housing markets, both new and resale, remain in good shape.

“The resale market in Vancouver is the hottest in Canada, with solid demand and price increases so far this year.”

The report forecasts an increase in housing starts next year.

Retail sales in B.C. are projected to increase 9.2 per cent this year, against an average increase of 2.6 per cent nationally. An anticipated increase of 4.5 per cent in 2016 will keep the province in first place in retail sales growth.

The report, outlining its predictions for all the provinces, singles out B.C. as “the (economic) leader,” the only province that will see GDP growth of more than three per cent in 2015, at 3.1 per cent, followed by 2.7 per cent growth in 2016.

Only Manitoba is expected to surpass B.C. in economic growth next year, with a 2.8-per-cent increase in GDP.

With oil prices low, the two provinces have supplanted Alberta and Saskatchewan as Western Canada’s economic kingpins.

At present, B.C.’s jobless rate is 5.8 per cent, which is pretty close to full employment, usually measured at 5.5 per cent.

The unemployment rate in 2016 is forecast to decrease to 5.7 per cent, which would be lower than that of Alberta, at 5.8 per cent.

B.C.’s per capita household income, at $38,890, will exceed the national average of $37,588 next year, and will be second highest in the country, behind Alberta.

Two points of uncertainty cited by the Conference Board were job creation in B.C. and the future of an LNG industry.

Source: Barbara Yaffe, Vancouver Sun

This Canadian Real Estate Blog was brought to you by BestHomesBC.com. Looking for a home to buy in Vancouver? Check out BestHomesBC.com for properties for sale throughout British Columbia.

Average home price of affluent Canadians tops $1.5-million

May 25th, 2015

Affluent Canadians are sitting on an average value of $1.5-million for their homes, a recent poll indicates.

Affluent Canadians are sitting on an average value of $1.5-million for their homes, a recent poll indicates.

That compares with an average price of $448,862 for homes sold in April, according to the latest figures from the Canadian Real Estate Association.

Excluding the red-hot markets for the greater Toronto and Vancouver, the average figure in April was $339,893.

Indeed, the poll published Monday by the Bank of Montreal puts the average value of an affluent homeowner’s primary residence in Vancouver at $4-million and at $1.8-million in Toronto.

High-net-worth Canadians are those with investible assets of $1-million or more, the BMO report says.

The poll also indicates that 95 per cent of affluent Canadians own their residence, as opposed to renting, and that 58 per cent state they have paid off their mortgage.

Among those carrying a mortgage, the average amount they have left to pay is $176,000, the poll shows.

“There have been substantial wealth increases in the last decade, decade-and-a-half, partly as a result of the rise in real estate values,” said David Macdonald, senior economist at the Canadian Centre for Policy Alternatives.

“If you owned a house that was paid off in 2002, then this is very good news for you. Those folks who managed to do that are going to be relatively well off,” he said. These homeowners will tend to be older, he added.

But people in their 20s, 30s and 40s who just got into the housing market or are at the halfway point of paying down their mortgage are carrying high debt levels, Mr. Macdonald said.

“My real concern isn’t so much ‘can they carry it today?,’ but 10 years from now as the cost of carrying debt rises.”

Among other findings of the BMO survey:

* 36 per cent of high-net-worth Canadians own a second or additional property
* Of those with a second or additional property, 40 per cent own two or more extra properties
* The top reason for owning a second property is to have vacation time, 47 per cent said
* Among those with an additional property, 80 per cent own one in Canada, 27 per cent in the United States and 11 per cent in Europe
* The average value of a high-net-worth primary residence in Quebec is $678,600, compared with $719,500 in Alberta

The survey results are from an online poll conducted by Pollara between Oct. 15 and Oct. 28, 2014, using a sample of 306 Canadians 18 or over who have at least $1-million in investable assets (excluding employers’ retirement plans, insurance products or their home).

Source: Bertrand Marotte, The Globe and Mail

This Canadian Real Estate Blog was brought to you by BestHomesBC.com. Looking for a home to buy in Vancouver? Check out BestHomesBC.com for properties for sale throughout British Columbia.

April hottest month for B.C. real estate in a decade

May 14th, 2015

April hottest month for B.C. real estate in a decade.

April hottest month for B.C. real estate in a decade.

$6.3 billion worth of British Columbia real estate was sold in April, making the month the hottest April for home sales in a decade.

The British Columbia Real Estate Association reported Thursday morning a 45.5 per cent increase from April 2014 in the total sales dollar volume and a 28.7 per cent increase in number of home sales.

“Last month was the strongest April for home sales in a decade,” said Cameron Muir, BCREA Chief Economist. “The elevated level of buying activity this spring is now expected to push 2015 home sales to their highest level since 2007.”

January, February, March and April of 2015 were banner months for real estate sales in B.C. with sales dollars rising over 37 per cent to $19 billion when compared to the same period in 2014.

Residential unit sales also increased by 24.5 per cent to 30,091 sold listings during the first four months of 2014. April alone saw almost 10,000 MLS® sales.

“Consumers are taking full advantage of rock bottom interest rates and are demonstrating significant confidence in the housing market,” added Muir. “However, dwindling inventories combined with competition for detached homes in the province`s large urban markets is pushing home prices higher.”

In Vancouver, B.C.’s hottest real estate market, there were 4,179 residential MLS® sales in April, according to the Real Estate Board of Greater Vancouver.

The average MLS® residential price in B.C. in April was $631,860 while Vancouver’s remained slightly higher at $673,000.

Source: Jill Slattery, VanCityBuzz

This Canadian Real Estate Blog was brought to you by BestHomesBC.com. Looking for a home to buy in Vancouver? Check out BestHomesBC.com for properties for sale throughout British Columbia.

Another record breaking month for real estate sales in Vancouver

May 5th, 2015

Home real estate sales jump 37% across Metro Vancouver in April.

There are more people trying to buy than there are people trying to sell their homes in Metro Vancouver. The Real Estate Board of Greater Vancouver has found sales for all types of homes in April were 30 per cent higher than the ten-year average.

Sales of detached properties were up 37 per cent when compared to last April 2014. That breaks the record for April set only last year. Apartments and townhouses are also selling. Sales of apartments this April are up 34.7 per cent compared to last.

Demand is continuing to push prices even higher. The REBGV says the average price for all types of homes is up 8.5 per cent. The average detached home now sells for $1,078,900.

Board President Darcy McLeod says low interest rates are fueling this, coupled with a larger number of interested first time buyers. He says some are selling to take advantage of already high prices. “We’re also seeing a lot of movement around the region. For example, people that may live in North Vancouver now where we’re seeing densification might be moving out to Coquitlam or even Pitt Meadows and Maple Ridge where they can still buy a detached home for a reasonable amount of money and do fairly well on selling their home in North Van or in some cases, Burnaby.”

Real Estate Board of Great Vancouver president Darcy McLeod says demand is outpacing supply. “We’re seeing a lot of frustrated buyers that have been looking for some time that just haven’t been able to find the right home or they’ve lost out in a number of multiple offer situations. So there still is quite a strong pent-up demand in the market.”

McLeod recommends coming up with a strategy with a realtor before trying to buy.

The Fraser Valley Real Estate Board is also reporting a big sales increase for April. Sales were up 37 per cent this April compared to April 2014. It says this April is the third highest of all time for the month. A single family home in the valley now sells for $595,600 on average.

Source: Jill Drews, News1130

This Canadian Real Estate Blog was brought to you by BestHomesBC.com. Looking for a home to buy in Vancouver? Check out BestHomesBC.com for properties for sale throughout British Columbia.

Metro Vancouver housing affordability continues to slip-slide away

May 1st, 2015

Metro Vancouver housing affordability continues to slide.

Housing affordability in Metro Vancouver continued to slide in the first quarter, making it even more difficult for Vancouverites to own a home the country’s least affordable region, according to the latest Desjardins Affordability Index released Wednesday.

The report, which compares housing prices with income in metropolitan areas outside Atlantic Canada, shows the average property sale in Metro Vancouver is nearly $850,000, twice as high as the combined average home price ($424,000) of the other Canadian cities cited in the report.

The report only includes data from 18 metropolitan areas in Canada and excludes Atlantic Canada because Desjardins only collects information in markets where it conducts business.

That puts the average sale in Metro Vancouver 10 times higher than the average household income of around $86,000 a year.

Toronto, which is the second least affordable market, had significantly higher average salaries than Vancouver at $92,000 per household, and lower average housing prices of nearly $560,000.

Housing remains very affordable in Calgary, where the average household income is nearly $120,000 and the average cost of housing is around $445,000.

“It shows that people from Vancouver don’t have the income necessary to buy a home. Maybe the investors market is more important in Vancouver, especially for condos, and that looks like a factor,” said Hélène Bégin, Desjardins’ chief economist. “It would be really hard to buy a home without help from your family or someone else.”

Despite Vancouver’s continuous slide into an affordability crunch over the last three years, Vancouver’s resale market is growing, and is up two per cent since the start of the year and 12.9 per cent from the previous quarter, according to the index.

Vancouver’s affordability has the lowest index level in the country at nearly 70, while the index level for Canada is 117. That level indicates that Canadians on average have a salary around 17 per cent higher than the salary needed to buy a home at the average price, said Bégin.

In Quebec, the income is nearly 40 per cent higher (index level 156.5) than needed to buy a home at the average price of $275,000, according to the index. The DAI is calculated by determining the ratio between the average household disposable income and the income needed to obtain a mortgage on an average-priced home, or qualifying income. Qualifying income is calculated based on the cost of owning a home, including mortgage payments, property taxes and utility costs.

Nationally, the index shows households’ financial capacity to buy a home stayed close to the historical average, although affordability has declined since the start of the year.

Source: Tiffany Crawford, Vancouver Sun

This Canadian Real Estate Blog was brought to you by BestHomesBC.com. Looking for a home to buy in Vancouver? Check out BestHomesBC.com for properties for sale throughout British Columbia.

Over 40% of first-time home buyers in Canada need their parents’ help

April 23rd, 2015

BMO’s 2015 Home Buying Report found that 42 per cent of first-time buyers told an online survey that they expected their parents or relatives to help pay for their first home.

A Bank of Montreal report suggests first-time home buyers are increasingly turning to the “Bank of Mom and Dad.”

BMO’s 2015 Home Buying Report found that 42 per cent of first-time buyers told an online survey that they expected their parents or relatives to help pay for their first home.

That’s up 12 per cent from last year’s report.

The bank also said 40 per cent of the first-time buyers said they couldn’t afford a home without financial help from family.

The study found the first-timers were anticipating a downpayment of about $59,413 on average and had a budget of $312,700 for the purchase — slightly less than last year’s average price of $316,100.

The bank also found that 42 per cent of current home-owners surveyed said they were looking for family help with the purchase. Their average budget was $473,000 and their average downpayment was $123,214.

The BMO report is based on online interviews with a random sample of 2,007 people aged 18 years or more between Feb. 24 and March 5.

The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error as they are not a random sample and therefore are not necessarily representative of the whole population.

Prices in Canada have been rising since 2009, resisting regulators’ efforts to cool the market by restricting credit. In Toronto and Vancouver, values have surged as much as 56 per cent in six years. Now as the European Central Bank’s bond buying helps drive down rates to near-record lows in Canada, the housing market is poised to ascend even higher.

Re/Max, the country’s largest residential real estate agency, raised its forecast for home price growth to 3 per cent from 2.5 per cent last week because transactions and values were so high in the first three months of this year. In March, housing sales rallied 4.1 per cent, the most in 10 months.

Toronto home sales increased 11 per cent to more than 8,000 transactions in March over the prior year, according to the Canadian Real Estate Association. Prices in the country’s most populous city jumped 10 per cent to about $601,500.

In Vancouver, Canada’s most expensive home market, sales soared 53 per cent and the average cost to buy a home rose 11 per cent to $870,000.

Source: Canadian Press with files from Bloomberg

This Canadian Real Estate Blog was brought to you by BestHomesBC.com. Looking for a home to buy in Vancouver? Check out BestHomesBC.com for properties for sale throughout British Columbia.

Vancouver’s average house price hits $1.27-million

April 21st, 2015

Home prices continue to soar in Vancouver and the North Shore, where the average two-storey detached home is now selling for more than $1.27 million.

The average price for detached bungalows and two-storey houses across Vancouver, North Vancouver and West Vancouver have jumped by 10.6 per cent and 10.3 per cent in the last year, according to Royal LePage’s House Price Survey, released Wednesday. The average bungalow now sells for $1.175 million.

“The average price for homes in Vancouver shot up in the first quarter, particularly for detached single-family homes. This is being caused in large part by a scarcity of product and the high demand to live in the area,” Royal LePage broker Bill Binnie said in a news release.

Realtors on the west side are claiming that prices for single family homes in some high-demand areas have jumped by as much as 40 per cent.

Condominiums have gone up in price, too, showing an increase of 4.9 per cent to reach an average of $506,624.

“The market for condos has improved, but it is nowhere near as active as for detached homes,” Binnie said.

“Vancouver real estate has been a hot topic locally and nationally in recent months. With all of the discussions taking place, people are coming to the realization that there are a lot of prospective buyers chasing a limited number of detached homes. Would-be buyers are trying to get in now while they still can.”

Nationally, a Royal LePage survey found that the average price of detached bungalows was up 6.6 per cent to $405,895 and the average price of a two-storey home was up 5.3 per cent to $451,463.

The Canadian Real Estate Association also released its latest home sale numbers last week, showing a 7.19-per-cent increase over last year’s prices for all greater Vancouver real estate sales.

“Greater Vancouver and the GTA are really the only two hot spots for home sales and prices in Canada,” Gregory Klump, CREA’s chief economist said in a news release.

“Price gains in these two markets are being fuelled by a shortage of single family homes for sale in the face of strong demand. Meanwhile, supply and demand for homes is well balanced among the vast majority of housing markets elsewhere across Canada.”

The number of Canadian home sales in March was up by 4.1 per cent compared with February. The CREA says sales through its Multiple Listing Service last month were up in nearly two-thirds of the markets it tracks, led by gains in Vancouver, Calgary and Edmonton.

Source: Bethany Lindsay, Vancouver Sun

This Canadian Real Estate Blog was brought to you by BestHomesBC.com. Looking for a home to buy in Vancouver? Check out BestHomesBC.com for properties for sale throughout British Columbia.

Why Vancouver’s house price increases show no signs of stopping

April 8th, 2015

Global wealth flocks to Vancouver real estate.

From Albertan black gold to globetrotting wealth to lucky heirs, big money is flocking to Vancouver real estate and fuelling huge price increases that show no sign of stopping, according to the CEO of Sotheby’s Canada.

“You’re not only going to be competing with other wealthy Canadians, you’re going to be competing with wealthy people all over the world,” Ross McCredie told Business in Vancouver.

Sotheby’s Canada, which specializes in high-end real estate, released its annual luxury homebuyer report today. The report breaks out high-end real estate buyers into three generations: baby boomers, Generation X and Generation Y.

The report characterizes baby boomers as sitting on a large amount of collective wealth because they have benefited from inheritances from their parents and, especially in Vancouver, have seen their homes greatly appreciate in value over the past 25 years.

Eighty per cent of high-net-worth Canadians are over 55, and that generation now represents 30% of Canada’s population, according to Statistics Canada figures quoted in Sotheby’s report.

In turn, boomers are now helping their Gen Y children — the report defines this group as 15-35 — buy real estate. A Genworth Canada survey of first time homebuyers released April 7 found that in Vancouver, 40% had help from their parents, compared to 25% throughout Canada.

Meanwhile, Generation X (34 to 54) has largely had to fend for itself. McCredie called this cohort “generation screwed.” The high-end buyers in this group tend to be double-income professional couples, but they have been priced out of Kitsilano, Dunbar or Point Grey. They’re increasingly looking at homes in East Vancouver, where detached homes are now commonly priced well over the $1 million mark.

“In Vancouver a lot of families are taking up in East Vancouver, where 10 years ago that wouldn’t have been where they wanted to live,” McCredie said.

Wealth from outside the province’s borders continues to be attracted to Metro Vancouver, a trend McCredie said shows no sign of slowing.

That wealth is coming from other parts of Canada, in particular, from Alberta, as well as from abroad.

According to McCredie, wealthy Albertans have been attracted to Vancouver’s Coal Harbour neighbourhood, as well as Vancouver Island and Kelowna, and treat those properties as vacation homes. So it’s no surprise to him that Coal Harbour has a relatively high number of vacant condos (at 23.5%, the highest vacancy rate in the City of Vancouver, according to a 2013 analysis done by Bing Thom Architects planner Andy Yan).

“A lot of people bought in Coal Harbour because they only want to spend eight or 10 weeks of the year here and a lot of them are from Calgary or Edmonton and Toronto,” McCredie said.

“They’re not working or living here. They love Vancouver and they want to spend a good chunk of time here.”

The high-end real estate markets in Vancouver, Toronto and Montreal are all “heavily influenced” by international buyers, according to the report. Buyers from China dominate in Vancouver, from China, Russia and the Middle East in Toronto, and from the Middle East, China, Europe (especially France) in Montreal.

International students from wealthy families are also playing a role in Vancouver’s real estate market, McCredie said.

A common pattern is for the students’ parents to buy a high-end condo or even a large detached house in a wealthy neighbourhood such as Shaughnessy, with plans for the entire family to move to Vancouver in the future.

McCredie said the discontinuation of Canada’s investor immigrant program has had little impact on foreign real estate purchases in Vancouver.

That program required individuals with a minimum net worth of $1.6 million to loan Canada $800,000; it attracted 36,973 immigrants to British Columbia, two-thirds of whom came from mainland China. The program has since been changed to allow only 50 applicants a year.

The change has not deterred the flow of foreign money into Vancouver real estate because many investors are not interested in immigrating to Canada, McCredie said.

“A lot of these guys are very wealthy and they don’t want to pay Canadian taxes,” McCredie said.

Foreign money will continue to flow to Vancouver because the region has developed infrastructure and expertise to help wealthy people buy property. The recently launched official Chinese currency hub will make transactions even more convenient, McCredie said.

“The U.S. right now is a really difficult place to immigrate to or even buy a property in, whereas Canada has been much more welcoming,” McCredie said, adding that HSBC Canada, which is headquartered in Vancouver, is particularly well set-up to handle transactions from foreign buyers.

“Post 9-11, so much gets looked into in banking relationships [in the United States]. It takes a little longer to get your money from China into a Los Angeles bank.”

That means prices, especially for detached homes, which are limited in supply, will continue to rise. A recent Vancouver Savings Credit Union report predicted that by 2030, the average home price in Metro Vancouver will exceed $2.1 million.

Meanwhile, average incomes in Metro Vancouver continue to lag behind those of other major Canadian cities. Over the next three years, the City of Vancouver plans to spend $125 million from its capital budget on efforts to house both low- and middle-income people, as rising rents and tight housing supply squeeze residents.

While some observers have called for policy makers to take a look at reigning in foreign investment through higher taxes or restrictions, McCredie balked at that suggestion.

“If the government came out and prevented foreign buyers from buying real estate, it would have a huge impact in our market,” he said.

“And you would see a correction.”

Source: Jen St. Denis at Business in Vancouver with files from Frank O’Brien

This Canadian Real Estate Blog was brought to you by BestHomesBC.com. Looking for a home to buy in Vancouver? Check out BestHomesBC.com for properties for sale throughout British Columbia.


Real Estate Blogs