DATE

Fraser Valley Real Estate
Steve Saretsky -

Fraser Valley Condo Sales Sold Above Asking Price Reaching Epic Proportions Condo prices across Vancouver continue to push higher towards ever dizzying heights. In September 43% of all Vancouver condos sold above asking price, a slight drop off from previous months. However, much of the activity appears to be shifting towards the suburbs. Fraser Valley condos are being driven up to new heights, with locals squeezing each other out, eagerly trying to get their foot in the door. This ‘drive to qualify’ has pushed the MLS benchmark upwards of 35% this year. Condos Selling Above Asking Price is the New Normal If that wasn’t evidence enough of just how detached from reality things have become, the following charts should help. Here is the total number of condos sold above asking price by area. Abbotsford Langley North Surrey South Surrey As you’ll notice, there’s been nearly as many condo sales above asking price in 2017 than the last 16 years combined, and we still have a couple more months to go… Let the soak in while we reflect on a 2013 quote from former Bank of Canada Governor Mark Carney, “Real wealth is built through innovation, and it’s gained through hard

Steve Saretsky -

Pre Sale Condo Prices Soaring per Urban Analytics In a recent presentation held by UDI (Urban Development Institute), Michael Ferreira, the head of Urban Analytics, presented some insights on the pre sale condo market in Vancouver. Ferreira helps analyze market conditions for developers of large scale projects. With 20 years of insights on the market he’s seen a thing or two, but perhaps nothing like this… In his latest quarterly report he says: “Some developers are  taking  full advantage of  the  supply/demand  imbalance and  are  seeking  to  maximize  the  achievable  sale  values  for  their  projects by far exceeding previous highs attained in some sub markets. However, it is becoming  increasingly challenging to rationalize the substantially higher prices being sought in a number  of areas  of  the  region, particularly  for market‐watchers who  recall  the end  result  of  previous  market  cycles  where  rapid price  escalation  in  short  time  spans  were  experienced.” Metrotown Pre Sale Prices Jump 57% From his presentation his analysis shows pre sale prices have soared the most in Metrotown, jumping from an average of $700 in 2015 to $1100 per square foot today. Ironically, Metrotown also has the most new construction underway. He also highlights one recent project in

Steve Saretsky -

OSFI Announces Another Mortgage Stress Test Starting January 1, 2018 I’ve been mentioning for the past few months that another mortgage stress test was en route. Sure enough, like clockwork, OSFI- the watchdog of financial institutions gave the green light on another 2% stress test. This time the stress test was focused on uninsured mortgages. Today’s revisions focus on uninsured mortgages, after omitting them on the previous stress implemented back in November, 2016. The previous stress test created a scenario where highly leveraged borrowers desperate to enter into the housing market began bundling mortgages and seeking out private lenders in order to bypass the stress test. In fact, as of August 2017, insured loans dropped 4.5% year over year, while uninsured mortgages exploded by 17.3%. What Are the New Mortgage Rules? Now all borrowers will be subject to a new minimum qualifying rate, or “stress test,” for both insured and now, uninsured mortgages. This means regardless of whether you’re putting down 5% or 25% you will need to pass the required stress test. The new guidelines require the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada (currently 4.89%) or

Steve Saretsky -

Condo Market Continues to Propell Vancouver Real Estate in October A quick update for the middle of October. I’ve compiled sales and new listings for the period dating October 1-15. This provides a pretty good snapshot of where we stand, although it’s a relatively small data set and much can change by months end. Vancouver Detached Market The Vancouver detached market rebounded slightly on a year over year basis. Both sales and new listings increased. The 96 sales so far this month, are up from 71 for the same period a year ago. However, market conditions still tend to favour the buyer, select desired and well priced homes are still selling quickly. Vancouver Condo Market Condo sales increased 27% from the same period a year ago. Keep in mind this is compared to October 2016 which was heavily impacted from the shock of a foreign buyers tax. Despite this, condo sales remain well above the ten year average and upwards pressure on prices continues. Vancouver Townhouse Market New townhouse listings saw a huge jump compared to last October (up 53%) This is largely due to a bunch of new townhouses recently completing and hitting the market. The data set is

Steve Saretsky -

Vancouver Property Taxes Plummet As a Percentage of Home Prices With Vancouver Detached home prices growing 34% over the past two years (according to the MLS Benchmark) homeowners have benefited greatly from a windfall of equity, on paper anyways. This has resulted in homeowners using their homes as ATM’s, drawing down equity to finance their Vancouver lifestyle (Homeowner refinancing up 27%). This has helped cushion the blow of paltry wage growth. However, with a widening wealth gap, increased Government spending and political pressures, one has to think Governments will target wealthy homeowners next. Especially considering property taxes have failed to keep pace with home values. Annual Property Taxes Fail to Keep Pace With Home Prices As you’ll see in the charts below, the median tax rate (annual tax paid divided by sale price) for detached homes has failed to keep pace with home prices. While property taxes have increased on a nominal basis, they’ve actually been falling as a percentage of home value. Annual property taxes for Vancouver West Detached homes are just under $9000/ year, or around 0.25% of the homes value (based on median sales price). On the Eastside, property taxes as a percentage of median sales price is

Steve Saretsky -

Are Multiple Offers Slowing for Vancouver Condos? Vancouver condos remain red hot, however the number of sales sold above asking price is now on a 3 month slide. When a condo sells above asking it can generally be assumed it received multiple offers. Of course when a unit sells below asking price it does not necessarily mean it didn’t receive multiple bids. Yes, sales above asking price is not a perfect science, but it’s an interesting metric to keep track of. In September, 43% of Vancouver West condo sales were sold above asking price, a slight drop from 45% in August. Obviously this number is still ridiculously high but the 3 month slide does point to a bit of a slowdown, albeit partially seasonal. The sales to actives ratio still sits at 53% which is well above the 20% needed to be considered a ‘sellers market’. This tends to put upwards pressure on prices, which we’ve seen with Vancouver condo prices up 13% so far this year. As I have said for a long time, follow the sales to actives ratio to assess the temperature of the Vancouver Real Estate market. In fact, there appears to be a very close

Steve Saretsky -

Vancouver Pre Sale Condos Under Intense Scrutiny I’ve been highlight for a while now just how out of control the pre sale condo market is in Vancouver. The sales process lacks transparency, prices are borderline comical, and flipping activity resembles that of the infamous Tulip Mania. The reality is, pre sale condos are the exact same as a futures contract and should be regulated as such. Murky Sales Process In the midst of a housing crisis, many developments are being accused of offloading supply at overseas sales centres. With overwhelming evidence of Hong Kong Sales Centres. With the Vancouver real estate market in the midst of a speculative frenzy, pre sales have become all the rage for leveraging little money down and flipping (assigning) the contract for big profits before closing on it. Assignments have exploded in popularity of the past year. Some developments such as Kensington Gardens has seen 16% of the building flipped with the project still one year from completion. CRA Hunting for Tax Evasion The rapid increase in assignment flipping has spurred Canada Revenue Agency to take several prominent developers to court requesting the names of owners in an attempt to hunt down assignors who have

Steve Saretsky -

Vancouver Condo Prices Inch Upwards in September, Hit Record $872,486 The Vancouver condo market continues to push upwards, despite a cooling detached market. The average price per square foot inched upwards by a meager 0.5% from August and now sits at $1017 per foot. Here’s how the numbers shake out (View August Report Here). Vancouver Condo Sales Vancouver condo sales increased by 21% on a year over year basis. Although I don’t like comparing to September 2016 because it was right after a foreign buyers tax. However, foreign buyers tax aside, Vancouver condo sales were still 19% above the ten year average for the month of September. New Listings/ Inventory Levels Vancouver condo new listings increased by 3.5% on a year over year basis but were still 13% below the ten year average. While the increase on a year over year basis was much needed, we will need a continued increase of new listings to help replenish current inventory levels which have been pillaged by an excess of buyers. Here’s an updated image of Vancouver condo inventory levels. Down 34.5% year over year and obviously part of the reason for the flurry of bidding wars. Vancouver Condo Prices The average

Steve Saretsky -

Vancouver’s Detached Market Flat in September The Vancouver detached market remains relatively sluggish. This follows a similar trend which you’re well aware of if you read August Detached Report. On a year over year basis you could say sales rebounded, however, when looking at it from a more macro level, detached sales remained well below ten year averages. Detached Sales Detached sales increased on a year over year basis in all areas. However, this comes after a foreign buyers tax which plunged sales to near record lows last year. For example, Vancouver (East & West combined) sales increased 31% year over year, yet were 32% below the ten year average. New Listings & Inventory New listings surged across REBGV. Rising 10.5% on a year over year basis and 11% above the ten year average. New listings are trending above the ten year average for all areas. Inventory remained virtually unchanged, dropping 0.2% on a year over year basis. While inventory levels remain stable, they are still sitting slightly below normal levels. Sales to Actives Ratio REBGV- 14% Vancouver West- 9% Vancouver East- 12% Richmond- 12% Burnaby- 10% Similar to the last few months, most areas are in what’s considered a

Steve Saretsky -

Vancouver Remains Canada’s Most Unaffordable Housing Market RBC released it’s latest housing affordability report. To little surprise, Canadian Real Estate remains vastly unaffordable for the masses. After back to back declines, Vancouver’s affordability or rather unaffordability metric ticked upwards once again. The RBC Housing Affordability Measures show the proportion of median pre-tax household income that would be required to service the cost of mortgage payments (principal and interest), property taxes, and utilities based on the average market price for a particular segment of the market. The affordability measures are based on a 25% down payment, and a 25-year mortgage loan at a five-year fixed rate. As per the graph, Vancouver condos require 46.2% of one’s pre tax income. While it requires an impossible 114.6% of your pre tax income to for a detached home. Keep in mind, this is assuming a 25% down payment which from my experience most buyers don’t have today. Vancouver remains the most unaffordable housing market across Canada, by a long shot. Requiring a staggering 80.7% of one’s pre tax income for the typical home. With rising interest rates, something tells me this might get worse before it gets better… Join My Weekly Vancouver Real Estate Newsletter

Steve Saretsky -

Buyers Paying Hefty Premiums To Lock In New Condos With Condo inventory at all time lows, and prices continuing to surge upwards, buyers are desperately leaping on pre sale developments. But it appears it’s not just the developers cashing in on this frenzy. Students and innocent bystanders are being lured by hundreds of dollars to sit in line for buyers hoping to get in on the condo mania. In an article titled ‘I was paid $400 to wait in line at condo Sale‘ Vice is reporting some hefty payouts. “It was around 4 PM on a Friday afternoon when I got the call. A friend told me her landlord, who worked in real estate, was offering $800 for two people to hold her spot in line for 15 hours at a condo presale in Port Coquitlam. As a freelance journalist, this was an offer I couldn’t refuse. “Trevor John Boorma sells cars normally, but came out for $300-a-day to stand in for another real estate agent. He estimated nearly half of the people waiting in line were proxies.” Yes the mania has indeed spread to the unsuspecting suburbs where hoards of first time homebuyers are eager to enter the market.

Steve Saretsky -

China Attempts To Reign In Property Bubble Despite various attempts to slow China’s massive real estate bubble, nothing has thwarted it to date. Desperate authorities are taking another swing this time around at what some property developers have called “the biggest bubble of all time”. As of Saturday, Property owners in Xi’an, Chongqing, Nanchang, Nanning, Changsha, Guiyang, Shijiazhuang and Wuhan must now wait two years before they can resell flats, regardless of whether they are new builds or older homes. It remains to be seen if this will have any impact on China, which has undergone the single largest credit binge in economic history. Massive amounts of leverage and build up of household debt from the property sector have become a huge concern. Spillover Effect Into Cities Like Vancouver Naturally, with an abundance of excess credit, and rising home values in China, that money has overflown into other parts of the world, in particular Vancouver. According to David Green-Morgan, global capital markets head of research at JLL the surge in outflows only took off in the past couple years. In 2007 China’s commercial property outflow was less than $1 billion. Now it exceeds $20 billion annually. At the Shenzhen Real Estate Expo, marketing

Join the Monday Newsletter

Every Monday morning you'll receive a short and entertaining round-up of news on the Vancouver & Canadian Real Estate markets.

"*" indicates required fields

The Canadian Economy

Steve Saretsky -

Fraser Valley Condo Sales Sold Above Asking Price Reaching Epic Proportions Condo prices across Vancouver continue to push higher towards ever dizzying heights. In September 43% of all Vancouver condos sold above asking price, a slight drop off from previous months. However, much of the activity appears to be shifting...

Steve Saretsky -

Pre Sale Condo Prices Soaring per Urban Analytics In a recent presentation held by UDI (Urban Development Institute), Michael Ferreira, the head of Urban Analytics, presented some insights on the pre sale condo market in Vancouver. Ferreira helps analyze market conditions for developers of large scale projects. With 20 years...

Steve Saretsky -

OSFI Announces Another Mortgage Stress Test Starting January 1, 2018 I’ve been mentioning for the past few months that another mortgage stress test was en route. Sure enough, like clockwork, OSFI- the watchdog of financial institutions gave the green light on another 2% stress test. This time the stress test was...

Steve Saretsky -

Condo Market Continues to Propell Vancouver Real Estate in October A quick update for the middle of October. I’ve compiled sales and new listings for the period dating October 1-15. This provides a pretty good snapshot of where we stand, although it’s a relatively small data set and much can...

Steve Saretsky -

Vancouver Property Taxes Plummet As a Percentage of Home Prices With Vancouver Detached home prices growing 34% over the past two years (according to the MLS Benchmark) homeowners have benefited greatly from a windfall of equity, on paper anyways. This has resulted in homeowners using their homes as ATM’s, drawing...

Steve Saretsky -

Are Multiple Offers Slowing for Vancouver Condos? Vancouver condos remain red hot, however the number of sales sold above asking price is now on a 3 month slide. When a condo sells above asking it can generally be assumed it received multiple offers. Of course when a unit sells below...

Steve Saretsky -

Vancouver Pre Sale Condos Under Intense Scrutiny I’ve been highlight for a while now just how out of control the pre sale condo market is in Vancouver. The sales process lacks transparency, prices are borderline comical, and flipping activity resembles that of the infamous Tulip Mania. The reality is, pre...

Steve Saretsky -

Vancouver Condo Prices Inch Upwards in September, Hit Record $872,486 The Vancouver condo market continues to push upwards, despite a cooling detached market. The average price per square foot inched upwards by a meager 0.5% from August and now sits at $1017 per foot. Here’s how the numbers shake out...

Steve Saretsky -

Vancouver’s Detached Market Flat in September The Vancouver detached market remains relatively sluggish. This follows a similar trend which you’re well aware of if you read August Detached Report. On a year over year basis you could say sales rebounded, however, when looking at it from a more macro level,...

Steve Saretsky -

Vancouver Remains Canada’s Most Unaffordable Housing Market RBC released it’s latest housing affordability report. To little surprise, Canadian Real Estate remains vastly unaffordable for the masses. After back to back declines, Vancouver’s affordability or rather unaffordability metric ticked upwards once again. The RBC Housing Affordability Measures show the proportion of...

Steve Saretsky -

Buyers Paying Hefty Premiums To Lock In New Condos With Condo inventory at all time lows, and prices continuing to surge upwards, buyers are desperately leaping on pre sale developments. But it appears it’s not just the developers cashing in on this frenzy. Students and innocent bystanders are being lured...

Steve Saretsky -

China Attempts To Reign In Property Bubble Despite various attempts to slow China’s massive real estate bubble, nothing has thwarted it to date. Desperate authorities are taking another swing this time around at what some property developers have called “the biggest bubble of all time”. As of Saturday, Property owners in Xi’an,...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022