As a realtor I constantly get asked that question. Where’s the market going? When should I buy (or sell)? Is now a good or a bad time? Well, I’m no crystal baller but right now I’d rather be a buyer than a seller. However that still doesn’t mean that any particular time is a bad time to buy or sell if you have a compelling reason to buy or sell real estate. In this article I’m going to cover the main things that are affecting our local Vancouver real estate marketplace, some of which are also affecting the Canadian market as a whole. Here goes:
- Asian Buyers
The Asian (and mainly Chinese) buyers have been a force here since about 1997 and have had a huge impact on the YVR market, mainly because there are so many of them and most have centred on a few specific neighbourhoods. We have to remember that, especially as they relate to a relatively compact marketplace such as Vancouver’s West Side, as one of our office realtors wryly noted, “As the planes land at YVR so goes the West Side market.” In a country of 1.2B people that is minting millionaires at a yearly pace about the size of Canada’s entire population (a slight exaggeration but you get the point) it takes only a infinitesimally small number of those buyers to radically affect one neighbourhood’s prices, which it has. These buyers have abated somewhat for now, probably due to economic changes in their homeland as well as the world in general. They will return; we just don’t know when. And yes, it has dramatically affected the West Side Detached market’s sales and prices (as well as areas such as West Vancouver).
- Global Economics
There is no question Europe is in economic turmoil and won’t recover quickly. The US is basically in the same boat. Now China is experiencing some growth decline as well. Even “solid Canada” is feeling the economic pinch. In today’s smaller, interconnected world we are all affected much more than before by what each other does. There is no question that global economics is affecting our market, as it is in England, Ireland, Spain, the US and most other countries (we won’t even talk about Greece). So yes, the current global economic malaise is affecting our local real estate market.
- Interest Rates
With anemic global growth keeping prime rates low would a dramatic interest rate hike affect our market? Absolutely. But we shouldn’t worry about a rate hike, especially a dramatic one, any time soon. We have to worry more about deflation than inflation. The advice here is to keep your powder dry and don’t overextend yourself from a financing perspective. And remember the oppressive interest rates of the early ‘80’s? They were tough to go through but the world didn’t end.
- Mortgage Rule Changes
Yes, the latest round of Canadian mortgage rule tightening will affect the entire Canadian real estate market, mostly first-time buyers. They will be able to afford less property than they would have before July 9 and some will be forced to put off buying for a while until they can amass a larger down payment or settle for a smaller home. Entrepreneurs with “stated incomes” will be negatively affected also, unless they can prove what they say they make. The general consensus is that the net effect of the recent mortgage rule changes was equivalent to about a 1% hike in interest rates. So yes, these changes will affect the market but possibly not until the fall when the first-timers (who are having “fun in the sun” right now) try more seriously to get into the market. And a note on Canadian mortgage defaults (defined as being 3 or more months behind in payments): only about 0.42% is in that position. At the US default height that figure was about 5%. Big difference.
- Traditional Market Momentum
Most people have tended to overlook this rather obvious statistic. On average real estate cycles last about eight years. With the exception of the late ’08-early’09 blip. We’ve about doubled that run. The fact is that all markets have to rest. We’re due for one and this is probably it.
- The Elephant in the Room – a potential NDP Government…
Nobody’s brought this up much yet but if we use history as a predictor of the future – remember the 90’s in BC? Yes, there was more than one cause for those times but here in BC when an NDP government resided in Victoria corporate investment left in a big way (so did foreign investment). In fact BC became a “have-not” province during that time. And right now we’re at a crucial juncture because a lot of national and regional companies are already longingly eyeing Alberta. The cost of doing business is simply lower there and companies often have trouble attracting employees to “expensive” Vancouver. Rightly or wrongly, an NDP government would do nothing but exacerbate that process. And whether you like big corporations or not, they employ people and a steady job (or jobs) allows a family to spend money on cars, furniture and homes. My purpose here is not to politick but to state a fact – corporations and investors do not like socialist governments. To my mind that is the single biggest “reasonably predictable” eventuality on the horizon that could quite negatively impact the Vancouver/BC real estate market. And right now the polls are solidly predicting that eventuality.
Many varied and divergent factors are currently affecting our Vancouver and Canadian real estate markets. And though the pundits, naysayers, negative nabobs, bloggers and book purveyors will take any or all and run with them, many believe that for all the above reasons and maybe a few more we’re simply at the end of an overextended cycle. Every market needs to take a rest, and right now Vancouver is doing that. Of course a catastrophe of any sort could send it into a tailspin but none of us can accurately predict something like that.
Finally, as local real estate guru Ozzie Jurock says,”It’s not really ‘timing the market’ or’ location, location, location’. It’s ‘the deal’!” Does the deal work for you and/or make sense given the overall situation? That’s the question you ultimately have to ask yourself. It’s Buyers’ Time folks, so go find yourself a deal…!
J. Neil Hamilton is a Senior Property Advisor with Macdonald Realty Ltd. with expertise in the buying, selling and leasing of both residential and commercial properties throughout the GVA. He can be reached at 604-569-1940 or firstname.lastname@example.org.