Strong demand in Metro Vancouver – Canada’s hottest real estate region – has pushed typical detached home prices past the $1-million mark, with February sales well above average.
Who is purchasing the homes, and how can they afford them? Offshore buyers are stepping up, as are people capitalizing on low interest rates and renting out suites, according to Ray Harris, president of the Real Estate Board of Greater Vancouver.
The benchmark price for a single family home in Metro Vancouver is now $1,026,300, up 9.7 per cent over February 2014, according to the real estate board.
Benchmark properties represent a typical residential home in a given market, and in Richmond, Burnaby, Vancouver and North Vancouver, single-family benchmark homes now exceed $1 million.
Several other Lower Mainland municipalities are creeping up to the million-dollar mark, including Port Moody at more than $900,000, and Coquitlam at more than $800,000.
Despite the hefty increases, the real estate board says buyer and seller activity was strong in February, with home sale and listing totals beating the region’s 10-year average for the month by 20 per cent.
“It’s an active and competitive marketplace today. Buyers are motivated and homes that are priced competitively are selling at a brisk pace,” Harris said.
He attributed the growth in sales to offshore buyers, Vancouver residents moving out of the core and record low interest rates. Buyers are now taking out larger mortgages and covering them by renting out suites in their houses, he said.
“How can people afford a million-dollar home? Well if they have an income of $3,200 from two suites, all of a sudden it’s more affordable,” he said. “You are going to see a lot more suites and sharing of the costs.”
Andrey Pavlov, a professor of finance at Simon Fraser University’s Beedie School of Business, sounded a cautionary note, describing the boom as “of great concern.”
“People are clearly using the (tiny) drop in interest rates to over-extend themselves even more,” he wrote in an email, adding that he saw the drop in interest rates and sharp decline of the dollar as “symptoms of a very weak Canadian economy.”
Residential property sales in the region reached 3,061 on the Multiple Listing Service — a 21 per cent increase over the same month last year and a 60 per cent increase over January 2014. The benchmark price for all Metro Vancouver residential properties rose to $649,700, 6.4 per cent above February 2014.
Even the recently stale condominium market is gaining traction, with recent price increases above the rate of inflation — something that hasn’t been seen for several years, said Cameron Muir, chief economist at the B.C. Real Estate Association.
Muir said home sales should continue to increase, though record sales levels are unlikely this year or next. The sales figures, while strong, were beating averages that had been depressed for a few years, he said.
“Sales will be above your longer-term averages. We’re kind of ratcheted up to another level that we haven’t seen in a number of years, and that’s being backed by some pretty solid economic fundamentals,” he said, including low interest rates, a strong economy and low gas prices that help to raise confidence.
New listings for detached, attached and apartment properties in the region totalled 5,425 in February, a 15.4 per cent increase compared to the 4,700 new listings reported in February 2014.
The sales-to-listings ratio was 25.7 per cent, the highest since March 2011, according to the board.
“Total homes for sale on the marketplace has really steadily declined … and as a result we’ve seen marketplace conditions go from buyer’s market conditions in 2012 to now cusping on that seller’s market territory in 2015,” Muir said.
Meanwhile, sales of all property types were up by 21 per cent in the Fraser Valley, according to the Fraser Valley Real Estate Board.
Board president Jorda Maisey said it was the busiest February since 2007, with 1,337 homes sold in the Fraser Valley — compared to 1,102 the year before. The number of new listings declined by four per cent.
The benchmark price of a single-family detached home in Abbotsford in February was $450,200, 3.9 per cent higher than in February 2014. The price of a townhouse was $228,600. The benchmark detached home price in Langley was $585,900 and it was $945,300 in White Rock-South Surrey.
Source: Tiffany Crawford and Matthew Robinson, Vancouver Sun