Here we are almost at the end of 2019, and the upward trend that started in June in the Vancouver real estate market has continued through November. As a matter of fact, we are one third of the way through the current month, and, if the trend continues, December is will also see a huge increase in the number of sales.
Let’s have a look at the November numbers in the Greater Vancouver Area (For a more detailed report for the area of your choice, text me or shoot me an email):
Detached homes led the way with 833 units sold, showing a 60% increase year over year. Town homes and condos saw 55% and 49% increase respectively in number of sales compared to November 2018.
This sharp increase in the number of sales is significant because it was accompanied by a large drop in the inventory. The number of active listings for detached homes dropped by 20%, followed by a 15% decrease for condos. The town homes inventory dropped by 11%.
So, why do we see fewer new listings coming to the market?
In the resale market, the number of listings in all 3 categories dropped. Why are people reluctant to list their houses?
In my opinion, it’s mostly due to price expectations. In the past decade, Vancouver has been home to one of the most active and expensive real estate markets in the world. This has resulted in a dramatic shift in the expectations of sellers in regards to the price and the overall ease in the sale process.
A considerable number of resale sellers are known in the industry as downsizers (not to confuse with the movie Downsizing). These are sellers who don’t plan to use all of their equity in the purchase of their new home. Therefore, for these sellers it is emotionally difficult to list their homes in a market where prices are lower than they were a few years ago. Lower prices also put pressure on their future plans to use the equity for retirement or help their children, hence their reluctance to list their homes. There are also other groups who are potential sellers in the resale market: mover ups, flippers, etc., who are more likely to list their house in the current market.
The construction of new detached homes and condos has slowed down as developers and small builders held back during the slowdown. As a result, the inventory in both of those categories has dropped. The inventory of new town homes has increased, as they are becoming the alternative for families who can’t afford the steep prices of detached homes, encouraging the developers to build more townhouse projects.
Now, the million dollar question:
Are we heading to another overheated market with buyers competing and properties selling way over their listing prices?
In the past, foreign buyers were one of the major factors in drawing the prices upward in the Lower Mainland. With both provincial and municipal governments imposing taxes to curb foreign involvement, the overall dollar value of foreign purchases has dramatically decreased. According to property transfer tax data from the BC Government, foreign buyers were involved in $135M of residential transactions across the province. That remains well below the cycle high of $400M in June of 2017. The absence of foreign buyers from the market will result in the current balanced market to continue.
We have yet to see if the potential sellers will jump off the fence and decide to list their homes in a market with lower average sale prices, but as life continues, we all have to move on with our plans!
Predicting the future is a fool’s game, but if foreign buyers stay away from the market and low interest rates continue, we are most likely heading toward a more balanced market. This means that. at one point, the downward price trend will stop (we already see it has slowed down) until it reaches a point that is dictated by, you guessed it, the ever dominant law of supply and demand.
Merry Christmas and happy New Year and thank you for reading!