State of the Market – Fall 2012
I’ve mentioned before in this space that Vancouver is a real estate-obsessed city. But it used to be that people were obsessed with it because prices just never seemed to stop going up. Now we’re obsessed with it because we’re all wondering if it’s going to crash! I mean, it’s going to, right? The media and every would-be expert out there are telling us so aren’t they? And of course they know what they’re talking about…
So on to what’s really going on. Yes, we have a substantially slower market right now than what we’ve been used to in a very long time. But make no mistake, business is still being done. Let’s take a look at what’s affected the market recently and what will affect it going forward:
Firstly, and as I’ve stated before, we must all remember what a “normal” real estate cycle is and what we’ve just experienced here in Vancouver (and actually throughout most of Canada). A “normal” cycle, the time period in which the majority of people make a move to another property (up or down…) is 7-8 years. In BC anyway our run was about 12 years – pretty much ever since the Liberals took power and “opened BC for business” as Gordon Campbell stated. So we were way overdue for a correction. We had a short, externally-influenced one in late ‘08/early ’09, but the market bounced back with a vengeance and kept on going until this year (it hit its price apogee around May of 2011). But then the wheels began to fall off the economies of Europe and the United States and financial fear began to pervade the globe. Now China, the golden boy of growth, is seeing its economy pull back to almost half the growth it had a year ago. We can then factor in such things as our federal government mandating much stricter lending guidelines, which has affected first-time buyers along with everybody having to qualify at higher rate levels and needing more income to qualify for the same borrowing amounts (lenders have tightened up considerably as well). And even though we can’t exactly complain about interest rates (except when we’re trying to save money..!) and the feds can’t really raise them due to the level of our CDN dollar, that (petro…) dollar is keeping our exports low so that a lot of exporting companies are hurting and not hiring workers – you get the picture. So we’ve hit a bump in the road.
So now that we’re “here”, where are we going? Well, as always, nobody really knows, not Garth Turner, not CTV News, not Maclean’s Magazine and not the Globe & Mail. I believe we’re heading into a time – for the real estate market and the economy in general – of more or less status quo, where things will not be really awful but they won’t be really good either. Much in the US is currently on hold until the upcoming presidential election, and as its largest trading partner that affects Canada. The US has a very polarized electorate (again) with two very different ways of looking at the world. Obamacare would be repealed under Mitt Romney, and yet if Romney wins will the Tea Party control his agenda? So it’s an atmosphere of uncertainty. And in uncertain times, everyone keeps their powder dry – but back to Vancouver real estate!
The Chinese buyers are on hold, so the West Side and West Vancouver will stay soft. However, as we’ve already seen, a lot of the “normal” money has shifted to East Van., first to detached, then lately to condos. The money will go where the bulk of the market can afford to buy. Downtown has been slow and will continue to be. The cost/sq. ft.’s had been getting ridiculous and they’re coming down. But money is still out there and good deals will continue to get snapped up. On the commercial side, even though there is a lot of retail space out there for lease, good purchase deals are still being grabbed, sometimes in a fight. Remember, Vancouver is an international market now and the world wants to live here (for a number of reasons). But if the market stays in a semi-dormant state for too long who knows, maybe we’ll have to come up with another topic of conversation at parties..?? Ah, but wait – the NDP is coming. That oughta put the fox in the henhouse…!