Spring Market Update

This is my market update for spring 2018. As we have seen for last two quarters at least, the lower mainland continues to exhibit signs of being a bifurcated market or as CMHC describes it as “two speed” between the detached and attached markets. The east side is more of a balanced market while the westside in detached has become a buyer’s market. New listings have been weak, but overall inventory has inched upwards. Combined with the federal mortgage stress test, rising interest rates, as well as Chinese capital controls (and before the budget announcement, just the expectation of new Provincial action on the housing file) have all put downward pressure on pricing of detached homes most notably in the $2M plus market. This has been the trend over the last 6 months as the average detached home price reached a peak of $1.8M in May 2017 and has been in decline ever since. Many sellers and investors remain bearish and motivated, willing to adjust pricing, predicting a softening of the market after records highs; while others remain more steadfast, unwilling to adjust price (or preferring to wait to list their home entirely until prices rebound). More entry-level detached homes in Vancouver between $1 and 2M  (yes as crazy as that “entry” sounds) remain a bit more firm and inflexible on pricing. The long term trend and forcasts for this market has been to expect downward pressure on pricing. Investors and speculator have acted accordingly on this expectation. Places like Surrey, however, which has been the go-to spot for affordability, remain stable as finding a decent single detached home under $700K remains a major challenge, if not virtually impossible. 

But unlike Toronto where price swings can be more volatile, Vancouver hasn’t seen any major free-fall in prices that has cascaded down to all segments of the market. Which brings us to the attached market —an entirely different story. Inventory is at historical lows and at its lowest level since December 2016 and demand remains brisk as buyers focus on more accessible townhomes and condos. Though more supply is coming online over the next year or two, the current pace can’t keep up with demand. Pre-sales are selling out fast and condos under $800K remain highly coveted in the downtown core. Sellers seem reluctant to adjust pricing even at the risk of listings going stale and buyers seem more reticent and unwilling to snap up anything that’s listed at least downtown. We’ve seen listings remain active for a month or two or even longer. Meanwhile, more price conscious buyers search further out in the suburbs for more affordable options, putting unprecedented upward price pressure in the outer suburbs: places like Maple Ridge town centre are virtually on fire and as far away as Langley, Abottsford and north to Squamish continue to see price increases in the condo and townhome market. I think we’re still seeing a bit of latent demand fueled by mortgage pre-approvals that came under the wire before the stress test changes came into effect Jan. 1 which remain effective for up to 90 days. In the downtown peninsula, the continued development (and easy sellout) of luxury presales continues to put upward pressure on the price per square footage benchmark: not long ago what averaged around $1000 a square foot can now easily surpass $2000. The one hope is that because housing starts are up and more supply is expected to come online in the next year or two, this could help temper prices in this segment of the market. If interest rates continue to rise we could see a little softening in prices in the under $700K segment of the condo market; or at least we can hope the recent unabated price escalations won’t continue for too much longer, allowing more first time buyers to enter the market.