If only you had a crystal ball to help you answer the question, “Is Vancouver real estate about to crash?” The Vancouver real estate market has seen prices soar to unheard-of levels in the past several years. This has kept the everyday person out of the real estate market, especially first-time buyers. However, as prices have finally started to drop, and news reports of money laundering scams have started to fade, there is hope for first-time buyers. But a crash? Well, let’s take a look.
Growth for Canada
According to The Canadian Real Estate Association (CREA), the Canadian economy is doing quite well. The things people care about, such as strong population and employment growth, in hand with a falling unemployment rate, are all looking good. The Bank of Canada did not follow through on the rumours that it would continue to make rate hikes. Plus, Canadians have taken on less debt, which is good, even though the debt they do carry does seem to be mortgage heavy.
Incentives for Buyers
The new federal budget for 2019 adjusted the maximum individual withdrawal limit under the Home Buyers’ Plan (HBP); it went from $25,000 to $35,000. They also introduced the First-Time Homebuyer Incentive, which provides a shared equity program. The federal government kicks in a portion of the home purchase in exchange for an equity share in the value of the home. “Both of these programs provide buyers with additional resources to buy a home, which will help home sellers,” according to Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada.
The Continuing Mortgage Stress Tests Saga
The slow sales in early 2019 are a sign that sales will remain low, according to CREA. This is in part due to the overly impressive results we have seen in the past few years for Canadian real estate. The slowdown is, as usual, being blamed on mortgage stress tests. Buyers are finding it harder to get the money they need to make their home purchases.
“OSFI mortgage stress test is currently a major obstacle in what’s become an elusive dream,” wrote Christopher Alexander, Regional Director and Executive Vice President at RE/MAX of Ontario-Atlantic Canada. “Requiring homebuyers to qualify at a higher rate is simply unnecessary. Particularly with the housing affordability crisis in many of Canada’s largest urban centres, young first-time buyers need a break and they need it now.”
The Vancouver Market
According to MoneySense, buying a single-family home in the City of Vancouver housing market is not a realistic expectation for most first-time buyers. The average detached house price of $1.7 million might still be within reach for some, as the long-awaited housing price drops have finally happened.
In April 2019, the house price drops were at a 20-year low, according to the Real Estate Board of Greater Vancouver (REBGV). As well, there was a slowdown in sales and an increase in inventory, which is seeing the lowest home prices since 2016 for detached homes.
There is also quite a difference between home prices in East and West Vancouver. The benchmark for a detached home in the east is down 12.1% at $1,357,200, and the west is down 13.4% at $2,948,400.
According to Vancouver Courier, the benchmark price in June for all property types combined slipped below the $1-million mark to $998,700. That is a 9.6% decrease from last June and the first time the price dropped below the $1-million mark since May 2017.
The Condo Market in Vancouver
Vancouver Courier also reported that condo sales in Metro Vancouver are declining. Total condo sales in June were 941 units, which is a 24.1% decrease from 2018. The benchmark price for a Metro Vancouver condo dropped by 8.9% over the past year and are 1.4% lower than this May. The average condo price sits at $654,700.
Where to Live in Vancouver
If you still think the real estate market is out of reach, there are some “affordable” areas to live in Vancouver. Some of the neighbourhoods that buyers are discovering include Main, Mount Pleasant, Downtown Vancouver West, and Renfrew-Collingwood. There is a good inventory of homes in these areas at relatively affordable prices.
MoneySense reported there are three neighbourhoods in Vancouver worth a look, including:
This is an area in gentrification. Getting in early is how you get the best homes in the soon-to-be best neighbourhoods at the best prices. Marpole is proving to be one such area. Now’s the time to get into this neighbourhood as the prices are about 25% less than the average Vancouver home. You will sacrifice some amenities, but once all is said and done, you will be one of the first to tap into this hidden gem. Also, in the past years, the properties have already increased in value by 116%.
This Vancouver West area is a great find if budget is not an issue. The average 2018 price was $2,615,000. You’re getting a ready-made community that is full of all things people want in a neighbourhood—a sense of community, diversity, shopping, dining, and proximity to the beach. It also has excellent walkability and public transportation, not to mention highly desirable mature streets and perfectly manicured lawns and gardens.
This is another area where prices are more affordable at $1.6 million. It’s in South Vancouver and is further along in the gentrification process than Marpole. The number one drawback in this area is it saw a lot of homes built between 1965 and 1985. So, you’re going to end up owning a “Vancouver Special.” If you’re not a fan of the box-like homes, this might not be the place for you. However, it could be an affordable option, especially if you’re a DIY specialist. You can get a great find at an even better price and customize it to create your dream home. You’ll be on the ground floor of the real estate market in a great family-centric area.
The good news is that there are many areas of British Columbia that offer the west coast lifestyle that so many people are seeking. However, if you are looking for the urban lifestyle that Vancouver offers, consider the information on the market above and get in touch with one of our offices or sales associates today.
Buying or selling a home is likely the largest and most important transaction you’ll ever make. That’s why so many trust RE/MAX: the most widely recognized real estate brand in the world. For more than 20 years, RE/MAX has been the leading real estate organization in Canada. By providing the best training, administrative and marketing support, brokers and agents are free to focus on what they do best: sell real estate.