It appears higher borrowing costs and tighter lending conditions are working their way through the Canadian housing market. Per The Royal Bank of Canada housing has not been this unaffordable since 1990. As a result, sales activity has slowed significantly, total home sales across the nation fell 9% year over year in September. It was the fewest sales for the month of September in six years. According to the Canadian Real Estate Association, home buyers retreated across the country, “About 70% of local markets were down on a y-o-y basis, led primarily by declines in major urban centres in British Columbia, along with Calgary, Edmonton and Winnipeg.” Meanwhile, active listings across the nation ticked higher by 2% year over year, bringing the national sales-to-new listings ratio to 54.4% in September compared to 56.2% in July and August. The long-term average for this measure of market balance is 53.4%. As a result of fewer sales and rising inventory, the average sales price remained virtually unchanged from September 2017, increasing just 0.2%, or negative when adjusted for inflation. The MLS Home Price Index Benchmark Price suggested a more rosy outlook, showing a slight gain of 2.28%. Price inflation topped out in Victoria +9%, and

It is becoming more well known how interconnected credit markets have become, and with that many global property markets are following a very similar housing cycle. With global credit tightening we are seeing widespread reports that once hot housing markets such as Sydney, Manhattan, Denver, London, and even Hong Kong have gone cold. Two Canadian markets which have historically followed a very similar trajectory is Vancouver & Toronto. However, more recently pundits or bank economists are suggesting the two markets have diverged with Toronto now rebounding and Vancouver mired in a slump which has pushed sales to an 18 year low. However, historical data suggests Toronto may simply be lagging behind Vancouver’s property cycle. When looking at a 12 month rolling average of housing sales we can see how closely correlated the two cities are. The most recent run-up shows Vancouver home sales peaked in July 2016. Toronto home sales peaked in April 2017, a nine month lag between the two cities. While Toronto is experiencing a recent uptick, sales remain weak. Further analysis by The Six housing Sense and Better Dwelling also shows Toronto appears to trail Vancouver’s major price gains and losses by roughly three quarters. Here is the year

With the recent slowdown in the Vancouver housing market becoming more widespread, Greater Vancouver (REBGV) home sales for all property types through the first 9 months of the year fell to an all time low. There appears to be some denial or perhaps confusion over current market conditions. Sellers are reluctant to slash prices and buyers feel disgruntled over how little prices have budged. This has ultimately resulted in fewer bids, creating more difficulty for price discovery. Amidst the confusion, some pockets or price segments remain stronger or perhaps more resilient than others. One way of gauging market conditions in certain price brackets is to compare months of inventory, in other words the time it would take for all the current inventory to sell if it all sold at the current rate without new inventory coming on the market. It is considered a sellers market when the months of inventory falls below 4, and a buyers market when months of inventory climbs above 6. In the condo market, entry level condos priced from $300,000- $599,999 remain quite strong. There is just 2.9 months of inventory for sale. However, as prices move higher the months of inventory begins to accelerate. Greater Vancouver condos priced from $700,000-$999,999

To little surprise it was another quiet month for single family homes in Vancouver.  Liquidity has essentially evaporated for higher end homes. Overall, home sales across the city of Vancouver declined 34% year-over-year.  There were just 111 home sales, the lowest total ever recorded, surpassing the previous low of 114 sales set back in September 2008. On a slightly more positive note, the East side of Vancouver, where homes are relatively more affordable, seem to be holding up better.  However sales still dipped by 23%. With sales volumes having tumbled over the past eighteen months, inventory has continued to build. However, it took a surprising decline in September. Total inventory for sale dipped by 2.1% on a year-over-year basis. It appears sellers are trying to weather the storm and wait for better market conditions in the spring of 2019. New listings plunged 28% year-over-year. This will be an important metric moving forward, however despite the plunge in new listings and inventory growth having stalled, there remains 15 months of inventory for sale. Unwelcoming news for sellers. Price declines are becoming more prominent. The average sales price of a detached home in Vancouver registered a 19.7% decline in September. The median

It’s been a long time coming. It appears the Vancouver condo market has finally surrendered to a plethora of market forces, the noticeable downwards shift in the month of September has it following the historically quiet detached housing market. Following a sluggish summer, there was much hope the Vancouver condo market would rebound in September. However, Vancouver condo sales dropped 22% from August to September. The decline was even more pronounced when comparing on a year-over-year basis, sales plunged 43% from September 2017. It was the fewest sales since September 2012. With sales just 3% higher than September 2008, when the global financial system was completely falling apart, the slowdown this year comes amidst relatively healthy and stable economic conditions. Unemployment across BC is near record lows, while wage growth and population growth remain rampant. Interest rates, although rising, are still negative in real terms. This certainly begs the question about future vulnerabilities considering unemployment has almost nowhere to go but up, economic growth is slowing, and the Bank of Canada seems determined to push interest rates higher. The recent weakness in sales has now pushed inventory considerably higher. Condo inventory in the city of Vancouver jumped 73% from a

Another plot twist was added to the Vancouver housing market. Yesterday the BC Government announced it has decided to reverse the decision to allow landlords the ability to increase rents by 4.5% (inflation + 2%) in 2019 back down to 2.5% (inflation). The controversial moves comes amidst strong political pressures to appease households struggling to maintain the cost of living amidst a housing crisis which has spread across the province. Since 2004, provincial regulations have allowed landlords to increase rents annually by inflation plus an additional 2%. Ironically, the move to end that policy comes at a time when rent prices appear to be flatlining and housing starts are beginning to roll over, both signs of a real estate cycle on its last legs. While the decision to cap rents at inflation has created a divide amongst developers, landlords, and renters, studies on rent controls show “rent control increased renters’ probabilities of staying at their addresses by nearly 20%. Landlords treated by rent control reduced rental housing supply by 15%, causing a 5.1% city-wide rent increase.” Unsurprisingly this has prompted developers of purpose built rental projects to threaten to pull the plug on new rental projects as stricter rent controls jeopardize

A key leading indicator for the economy is flashing red. Housing starts, which are historically a strong indicator of the health of the economy, are beginning to roll over. “The national trend in housing starts continued to decline in August from the historical peak that was recorded in March 2018,” CMHC chief economist Bob Dugan said. Housing starts are also slowing in Metro Vancouver. As of August 2018, the 12 month sum of housing starts sits at 26,565 units as per Stats Canada. This is slightly higher than August 2017, but off by 4% from its recent peak in March 2018. A slowdown in housing starts suggests homebuilders perceive risks ahead or simply can’t  make new projects feasible due to elevated land prices and construction costs, which is typical at this stage of the cycle. This does not bode well for future economic growth considering housing and the consumption that goes along with it (renovations, furniture, etc) are a big driver of the economy. In Canada, household consumption and residential investment as a percentage of real GDP is nearly 65%. While it’s certainly possible housing starts could rebound, it seems highly unlikely given how extended this current expansion is. The labour

The city of Vancouver has approved a new zoning policy that will permit the construction of duplexes in 99% of single family neighbourhoods. The change will mean about 67,000 single family lots which comprise approximately 52% of Vancouver’s landmass, are now eligible for duplexes. According to local data analyst Jens Von Bergmann, there will only be 576 lots remaining in the city of Vancouver which will remain a part of the single family zoning. While typically up-zoning increases the value of the land, it’s unlikely to spark a speculative fever in the city’s detached housing market, where home sales have tumbled to record lows through the first eight months of the year. Building duplexes from an investment or speculative perspective is simply not profitable in today’s environment. For example, with the typical costs of a teardown home on the West side currently hovering around $2M, and a minimum buildable cost of $300 per square foot, this would put your typical 1/2 duplex at (back of the paper math) $1.8M after factoring in all costs, including property taxes, realtor fees, and a developers lift (typically 15-20% net profit). In simpler terms, in order for a developer to speculate on buying up land

The residential property market in the province of BC continued its downwards momentum in August. Following fewer sales and rising inventory, there appears to be little sign of  resurrecting a market bogged down by tighter lending conditions and a swath of government tax policies. Home sales in the province dropped 26% year-over-year in the month of August. There were just 6748 sales in BC, a six year low for the month. The slowdown was rather daunting in the Fraser Valley where sales slid an eye watering 39.5% in August. Greater Vancouver sales fell 37%, Victoria by 21%, and the Okanagan-Mainline by 20%. Regardless of how you slice it, the trend was rather ominous. Despite the rather gruesome numbers, BCREA’s chief economist Cameron Muir preferred to take the more optimistic approach. Suggesting, “The downturn in housing demand induced by the mortgage stress-test is now largely behind us. The BC housing market is evolving along the same path blazed by Ontario and Alberta, where the initial shock of the mortgage stress-test is already dissipating, leading to increasing home sales.” Buyer sentiment disagrees. BC home buyers spent 27% less on residential real estate this August. Mortgage credit continues to contract, while simultaneously foreign buyers

With BC’s property market cooling, home sales declined 24% in July to a six year low, it appears interest from foreign buyers is also fading. At least according to official BC Government data. While the numbers likely don’t capture the full extent of the madness,  land title registrations for July show foreign buyers accounted for just 1.49% of all residential transactions in the province of BC. Foreign buyers haven’t been this scarce since August 2016, just after the introduction of the BC Governments foreign buyers tax. As the percentage of transactions from foreign buyers declined, so too did the dollar volume. Of the $9.9 billion spent on BC residential Real Estate in July 2018, foreign buyers accounted for a mere $201 million. This was a 49% decline from July 2017. Meanwhile, in the city of Vancouver where detached home sales are at a 27 year low and rent prices are flatlining, interest from foreign buyers has faded. Foreign buyers as a percentage of total residential transactions for the month of July 2018 trickled in at just 1.83%. With China continuing its attempts to stabilize foreign exchange reserves by mandating stricter capital controls, and a global credit cycle nearing an end, the

It appears Vancouver rent prices have finally stabilized, and like all real estate cycles, could be on a path towards declining. Recent data from local data scientist Louie Dinh of Quantitative Rhetoric, shows rent prices were essentially flat year-over-year in August. Year-Over-Year Beds Median 2017 Median 2018 Pct Change 1 $1950 $1950 %0 2 $2600 $2700 %3.8 3 $2950 $3000 %1.7 Adjusted for inflation, one bedroom and three bedroom rent prices actually turned negative. This is quite the change from the 10-12% rent price growth Vancouver has been experiencing over the past couple of years. Meanwhile, August rental listings saw a surge in volume. The number of unique listings increased 10% from July to 5872, which was good for a 17.6% gain from August 2017. Flatlining rents and a rising number of listings should come as little surprise to those who are familiar with real estate cycles. In the early stages of the cycle vacancy rates tend to fall and rent prices increase. However, as the real estate market begins to slow, while simultaneously new construction ramps up (currently at all time highs in Vancouver), vacancy rates increase and rent prices begin to fall as an abundance of new supply overwhelms

With a stagnant and declining detached house market, it was only a matter of time until panic buying began to fall out of favour and the slowdown spread into the condo market. Vancouver condo sales dropped 30% year-over-year in August, ticking in at a six year low for the month. With August 2008 and August 2012 just barely surpassing this year as the slowest on record. With condo sales cooling off, inventory has begun to increase. The number of Vancouver condos for sale increased by a whopping 51% year over year. Despite the increase, inventory levels remain below historic norms, however, the quick jump in inventory combined with falling sales is a concerning trend. Expect condo inventory to swell in the coming months and even years ahead, as a record number of new construction apartments near completion. There are currently a record high 43,024 units under construction and a plethora of housing starts also underway. In other words, there’s a pipeline of supply coming and the demand might not be there to meet it. This could create liquidity issues in Vancouver’s pre-sale condo space. Speculators who were once hopping to flip the contract prior to completion are running short on