CRE
Other

Investors in the Vancouver property market are at risk of price correction in the near future, according to a report released by UBS at the end of last week. According to the UBS Global Real Estate Bubble Index, Vancouver has some of the most over-valued property prices in the world.

Only London, Hong Kong and Sydney rank higher on the list, although both London and Hong Kong fall within the bubble risk zone.

In the report, UBS said: “Cities at or near the bubble risk zone face a higher risk of a large price correction.”

Vancouver’s high price-to-rent ratio suggests an “undue dependence of housing prices on low interest rates,” says the bank.

Many commentators blame overseas influences for the soaring prices, such as investors from Asia purchasing properties in the city and driving prices up, with locals finding it hard to get onto the property ladder.

However, the Canada Mortgage and Housing Corporation in its housing market assessment report, also released last week, only found moderate evidence of the over-valuation in Vancouver. The report instead flagged Toronto, Quebec and Montreal as cities with a significant over-valuation problem.

Bob Dugan, CMHC’s chief economist, said: “The most prevalent issue detected in 11 of the 15 centres covered by the HMA is overvaluation. Problematic overvaluation conditions in local housing markets could be resolved by moderation in house prices and/or improving economic conditions.”

The report also detailed overbuilding as an issue and said in a note Tuesday, that Canada’s 35 largest centres saw the average vacancy rate in privately initiated purpose-built rental apartments increase to 3.3% in October 2015 from 2.8% in October 2014.

Although this was partly due to an over-supply of  purpose-built rental apartment units, there was also lower  net migration in regions most affected by low oil prices.

Copyright © 2015 Key Media Pty Ltd

Ryan Smith
Other

Home prices in the Vancouver area are already Canada’s highest, with the average price for a single-family detached home hitting $1.58 million in October. But the apartment market is “unrelenting” as well, according to a veteran realtor.

There were 73 apartment sales in the first six months of 2015 – a 20% spike over the same period last year, according to the Goodman Report.

“It’s moving so fast. We’ve never witnessed this kind of deal volume and activity,” HQ Commercial principal Mark Goodman told the report.

Goodman said the rush to purchase apartments is unprecedented. “I’m getting 25, 30 people showing up over two-day periods,” he told the Report. Goodman said his team was forecasting that 155 apartment buildings would sell by the end of the calendar year — $1 billion in volume.

Many offshore buyers, including Chinese, Vietnamese, and German investors, have been showing interest in the apartment market, Goodman said.

“They’re interested because the euro is so strong versus the Canadian dollar,” he said.

Demand is also being driven largely by nearly nonexistent rental supply. Indeed, HQ Commercial principal David Goodman has predicted that low vacancy rates and high demand may cause a “rent increase tsunami” in the Greater Vancouver area.

In the Goodman Report, David Goodman noted that rents were spiking by 10-20% whenever an apartment turned over.

“The Goodman Report forecasts that over the next few years, in the face of ever-growing demand, tenants will need to brace themselves as annual rent increases will play catch-up and far surpass inflation rates,” he wrote.

Copyright © 2015 Key Media Pty Ltd

Ryan Smith
Other

A recent academic study shows that the majority of single-family homes purchased in Vancouver’s tony west-side neighbourhoods were likely bought by foreign investors.

An academic study by city planner Andy Yan found that 70% of buyers of single-family homes in Vancouver west-side neighbourhoods were likely from mainland China.

The study used methodology commonly employed in public health, political science, and Asian-American studies to identify the origin of names, with “non-Anglicised Chinese” names suggesting Chinese nationals or newer immigrants.

“There may be some miscategorisations as an Anglicized Chinese name could be someone who is a new immigrant and a non-Anglicized Chinese name could be a locally born citizen, but after an external review, we feel this is minimal,” Yan writes in the study.

An even more surprising statistic also came out of the study: of all self-declared occupations among owners in the study – in which the average home cost $3.05 million – 36% were homemakers or students with next to no income.

Many tax experts are concerned that offshore investors may be exploiting tax loopholes to evade GST and capital gains taxes, according to a report by the National Post. Housewives and students can live in Vancouver for a brief time, claim a home as a primary residence, and flip properties tax-free. The real home buyer, meanwhile, lives and works in China while funneling money through relatives into Canada to store wealth, the National Post reports.

“When you see all the homemakers and students on the titles buying $3-million homes with mortgages, it really supports the idea that money from somewhere else is coming in,” David Eby, the NDP MLA for Vancouver-Point Grey, told the Post.

Copyright © 2015 Key Media Pty Ltd

Steve Randall
Other

New figures from one of Canada’s largest banks and mortgage lenders shows the continuing growth of household debt.

RBC’s report reveals that total consumer debt is now $1.8 trillion (at the end of September) with mortgages contributing the lion’s share of the increase.

There has been a five per cent growth in debt since October 2014 and a 7.4 per cent rise since the end of the second quarter of 2015.

In the 12 months to the end of September residential mortgages increased by 5.9 per cent ($74.7 billion) while other consumer debt slowed.

Home loans increased by nine per cent of the total in the three months to the end of September.

Mortgages make up 71.2 per cent of household debt. Those home loans held by chartered banks make up 52.8 per cent of all household debt; non-banks hold 15 per cent; securitized mortgages make up 3.2 per cent; NHA MBS make up 2.8 per cent. 

Copyright © 2015 Key Media Pty Ltd

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Justin da Rosa
Other

It may be a small-scale study, but the statistics are sobering: One association has a large portion of buyers in Vancouver over the past six months are likely mainland Chinese.

An academic case study, entitled “Ownership patterns of single family home sale on selected west side neighbourhoods in the city of Vancouver,” by city planner Andy Yan, found that 70% of buyers in west-Vancouver neighbourhoods over the past half-year are likely from mainland China.

The study employed name analysis methodology commonly used in public health, political science, and Asian American studies to identify the origin of names. According to that methodology, “non-anglicized Chinese” names suggest newer immigrants or Chinese nationals.

The study found that 70% of homes purchased in the area over the six-month period were done so by people with non-anglicized Chinese names.

Not exactly the most concrete evidence, but the author of the study is confident in the methodology.

“There may be some mis-categorizations as an Anglicized Chinese name could be someone who is a new immigrant and a non-Anglicized Chinese name could be a locally born citizen, but after an external review, we feel this is minimal,” Yan writes in the study.

The most interesting finding for brokers, perhaps, is that most of the properties were purchased with mortgages – defying conventional thinking that these foreign-owned homes are usually purchased outright.

According to the study, only 18% of the 172 home purchases were not mortgaged by banks. It may not come as a surprise to some brokers, though.

“I had a request from a foreigner who wanted to purchase 20 condos and I was able to find a lender for that buyer,” Walid Hammami, a broker with Dominion Lending Centres, told MortgageBrokerNews.ca. “I didn’t go through with the transaction … in the end I didn’t want to get involved.”

Click here to access the study.

Copyright © 2015 Key Media Pty Ltd

Steve Randall
Other

Home sales in Metro Vancouver were up by nine per cent in October compared to the month prior with 3,646 homes sold.

Figures from the Real Estate Board of Greater Vancouver show that the year-over-year increase was 19.3 per cent and the month’s sales was 36.2 per cent above the 10-year average.

Apartment sales in Vancouver were up 21.7 per cent from a year earlier. Attached properties increased by 28.6 per cent year-over-year, while detached properties saw a 13.1 per cent rise.

“Home sales are more than one-third above what’s typical for this time of year yet the supply of homes for sale is the lowest we’ve seen in five years,” said Darcy McLeod, REBGV president.

“This activity has created favourable market conditions for anyone considering selling their home today.”

Active listings were at their lowest level in five years at 9,569, down 30 per cent year-over-year and 11.4 per cent lower than in September. 

Prices continue to increase with the benchmark MLS price at $736,000, up 15.3 per cent from October 2014. 

Copyright © 2015 Key Media Pty Ltd

Frank O’Brien
Van. Courier

Rampant land speculation fuelled by an avalanche of offshore money has driven new condominium prices to the tipping point, a senior real estate analyst warns.

“At a certain point buyers will just say ‘no,’” said Michael Ferreira, managing principal of Urban Analytics Inc., following his address last week to the Urban Development Institute, Pacific region.

Ferreira said “an immense amount of offshore capital” flowing mostly from mainland China into multi-family land speculation has nearly doubled the price of land this year and could drive future condominium prices into the stratosphere.

So far, buyers appear eager to pay what are already record prices, Ferreira told a lunch meeting packed with members of the development community.

In 2015’s first nine months, 2,000 more new condominiums sold in Metro Vancouver than in the same period in 2014, a 20 per cent increase. The standing inventory of completed and unsold concrete condominiums has plunged to just 70 units, despite more than 2,500 being completed since January.

Ferreira added that in downtown Vancouver, only six new highrise concrete condos remain unsold.

He said 21,600 new Metro Vancouver concrete condominiums are being marketed now for completion in 2018, 87 per cent of which are already pre-sold at record prices.

Average new concrete condominiums downtown are now selling for $1,100 per square foot and can top $825 per square foot along the Cambie corridor. 

Burrard Place, by Reliance Properties and Jim Pattison Developments Ltd., has sold 350 condominiums since its launch this year, with half the units selling for more than $1 million and per-square-foot prices averaging $1,200.

According to the Colliers LandShare survey, land prices for potential highrise condominium sites in Vancouver’s downtown and west side were in the $175 to $200 per buildable square foot range at this time last year. Recent land prices are now being bid up to $300 and $400 per buildable square foot. Offshore land speculators have been outbidding local condo developers, Ferreira said, and the traditional pro-forma calculations no longer apply.

“The new rule is there are no rules,” he said. 

© 2015 Vancouver Courier

CRE
The Vancouver Sun

Demand has far outstripped supply in the Vancouver housing market, driving prices skyward.

The median price for a single-family detached home on the city’s west side hit $2.91 million last month. That’s a spike of 15.9% from October of 2014 and a 42% jump from the same time in 2013. On the east side, the median price last month was $1.29 million, 29.4% higher than last year and 47.7% above 2013 prices.

The average home price for all of Greater Vancouver hit a record high of $1.58 million in October. Prices for detached homes within the city of Vancouver hit an average of $2.2 million in September. These price gains are driven largely by extremely limited supply.

“When my clients go to open houses, they see a lot of people who end up bidding,” Ken Wong, an agent with Royal Pacific Realty Group, told the Globe and Mail. “Bidding wars are common. There just isn’t enough housing product out there.”

Foreign investors – especially buyers from China eager to snap up high-end properties on the city’s west side – have garnered a lot of media attention as a key driver of price gains. However another driver is simply lack of available land to develop. Vancouver is effectively boxed in by the ocean on one side and mountains and protected lands on the other.

Whatever the ultimate cause, Vancouver currently has the highest housing prices in the country. Toronto came in at number two, with average prices for detached houses sold in the city at $1.05 million, a 10.7% increase over last year and up 23.1% from 2013.

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