5 of many of the reasons why I think the Vancouver Real Estate Market is still good
With the recent drop in the ratio of sales/listings in the past few months, as well as grim predictions of overpricing, many people are very reluctant right now to make a purchase move, because those people predict that the Vancouver Real Estate Market will come to a crash.
As somebody who works with many realtors, goes through the statistics, and also publishes column articles about the local real estate market on the Vancouver edition of the largest newspaper chain in Korea, Joongang Daily, I want to point out a few positive factors that make me believe that the Vancouver real estate market is NOT headed for a crash, but rather, just a stabilization of growth. Note the word growth. I still believe it will continue growing. Temporary dips in sales and prices do not indicate a crash, but rather, a stabilization.
For locals - don’t be scared. For Realtors - perhaps use this as a marketing tool? For outsiders - invest in Vancouver.
- Vancouver is more of a global market than a local market. It is still voted as one of the top cities to live in overall (we’d do better if we clean out the homelessness off our streets somehow) and our real estate market’s demands largely come from foreign investment - whether it be rich immigrants, or off-shore purchases. Just because the local market (meaning the general middle-class or lower-income families) is having a hard time to afford it does not mean it’s overpriced. From a global perspective, it’s still cheaper than New York, London, Hong Kong, Seoul, etc.
- Unlike the USA, which is struggling with its real estate market these days in many areas, we do not have tax-advantageous mortgage laws. Interest paid on mortgages are tax-deductible in the states (which encourages people to be more in debt) whereas in Canada, it is not the case at all. It might sound like we’re at a disadvantage, but that means the general debt ratio is lower, and the finances of ordinary citizens in Canada are healthier than that in the States. Refinance, second mortgages… Yep. Bad. The stock market crash 70 years ago happened because people were stretched way too thin - people were in debt for more than they were worth all their lives. Seriously. We don’t have it in Canada. So the grim predictions that the falling USA market will affect Canada soon is not quite as convincing to me. Maybe to a certain degree, but not a lot, because the market is structured somewhat differently.
The rental market in Vancouver is so strong. Vancouver in 2006 recorded the lowest vacancy rate since 1989. It was the lowest in the entire country, in fact. Some of the core areas like Vancouver, West Vancouver, the UBC area, White Rock, North Vancouver recorded such low figures running around 0.2%, 0.3%. That means there is still housing demand in Vancouver, and investment properties for rental purposes are still a good buy, that gives you headache-free, easy rental revenue. Statistics also show that more and more people are going towards renting rather than buying because the market is already at a level where they cannot afford to buy. This basically shows the widening gap of rich and poor, but it’s reality in this area because of all the foreign funds, as I mentioned in #1. This also creates a more solid base of rental population that will continuously give up their money to the rich people who do have properties that they own. It’s a good market to suckle off of. It sound harsh but it is true.
Vancouver’s population increased 23,000 or so in 2006, which is the largest influx since 2002, which was in the earlier stages of the real estate market boom in Vancouver. I’m not insisting we will go through those intense climaxes again in our market, but this still indicates a powerful growth nonetheless. This ties in with #3, because more people coming into the city means a higher demand for housing as well.- BC’s unemployment rate is very low. In fact, the strong economy is what ultimately contributed to #4, the increase of population, and #3, the increase in rental housing demands. Especially with the Winter Olympics coming up, as well as increased trades with China, and a growth of the IT/Media/Gaming type of industries in this region, it will hold a steady growth for at least a few more years.
So hopefully this took some of your skepticisms out.
Well the core areas of vancouver are all good I think, what you gotta watch out for is the outskirts that are not as booming, like Surrey Delta etc. those suburbs will not be as good of an investment i dont think.
cheers, thansk for the article and data.
Yes I agree, it’s time to get selective with your purchases if you want returns.
some of the outskirts like chilliwack and abbotsford are good too
I have 2 D/T condos I rent out, and I won’t sell them yet. its not like i need the cash right now. theres enough revenue from my rentals, so whatever. i know its going ot go up more so may as well hold onto it.
also there’s rumours that the capital gain taxes will be deferred in teh future if you re-invest, so nows not a good time to sell anyhow.
Did you honestly compare Vancouver to New York and London?
Did you honestly compare Vancouver to New York and London, and Hong Kong? My stomach hurts from laughing so hard
yOUR RIGHT, WHY COMPARE VANCOUVET TO HONK KONG OR LODON?
VANCOUVER IS FAR TO BETTER OF A CITY TO EVEN COMPARE >>>>>>
ITS CLEAN, BEAUTIFUL, WEAHTER KICKS ASS, WE CAN SKI AND SURF, WE ARE IN CANADA, HAVE THE BEST DAM HOCKEY TEAM IN THE PLANET, AND THE BEST SKIING IN THE WORLD….
HONK KONG AND LONDON ..GIVE ME A BREAK……..VANCOVUER IS NOT THE #1 CITY TO LIVE IN THE WORLD FOR NOTHING BUDDY…..
That supports my theory, thank you.
The Vancouver market does have the potential - I don’t believe it’s a bubble at all.
Lo trovo piuttosto impressionante. Lavoro grande fatto..)
As a realtor in the greater vancouver area, I have to agree with Jeff. Real estate prices is all about supply and demand. Factors such as foreign buyers, immigration, US economy, population etc etc all contribute to either increasing or decreasing supply or demand.
Lets examine supply first. In Vancouver, supply of new housing is extremely limited. We are building on the slopes of the mountains to the North, there’s the pacific Ocean to the West and the US to the South. The only direction for expansion is the East. That is the reason why places like Abbotsford and Mission and Chilliwack are also seeing increasing real estate prices. In specific areas such as the North Shore and downtown, supply is even more restricted as those areas are geographically isolated.
Moving on to demand. Everything that Jeff has mentioned is contributing to increasing demand. The affordability issue may start to become a factor in the future but not right now. Right now we are seeing some migration to the outlying areas because of high real estae prices but the numbers are negligible compared to those that can afford and want to live in the high priced areas.
When the demand is increasing at a faster rate than supply, prices go up. In areas like downtown, North and West Vancouver, the gap is growing at a much faster rate than elsewhere. This causes prices to increase at a faster rate, which in turn causes prices to increase in outlying areas as well.
There may be a lot of people with a lot of different stats and opinions which support a totally different train of thought but that is not what I’m seeing in the market. There are plenty of things that can happen to turn this current growth around but if real estate speculation, and this is speculation, is about making informed decisions based on logic and common sense, not fear and doomsday prophecies.
As a West Toronto Realtor I cannot agree with you. It´s true that we have in Canada another situation than in U.S., but you have to remember, that Canada has followed the American lead during four of the last six U.S. recessions. So even if the crisis in U.S. is because of the collapse of the sub-prime mortgage market and in Canada there is no such risk, I´m still thinking, that the prices in some areas of Canada will be rising.