Vancouver House Prices Fall By $7,000 A Month As Sales Hit Record Lows
Posted On May 6, 2019
If you own residential real estate in Greater Vancouver, it’s likely your property’s value is back to where it was in 2016 or 2017.
The latest data from the Real Estate Board of Greater Vancouver, released Tuesday, shows no letup in the region’s housing correction, with sales down 29.1 per cent in April, compared to the same month a year ago. Sales were little more than half their average over the past 10 years, REBGV noted.
According to blogger and realtor Steve Saretsky, sales of all housing types hit their lowest level since 2000, while detached home sales were the lowest on record.
The benchmark price for all housing types in the area is down 8.5 per cent from a year ago, to $1.008 million. This works out to a decline of about $7,000 a month over the past year, and it puts the benchmark price back to where it was in June, 2017.
The correction has been more severe in detached homes, with the benchmark price falling 11.1 per cent over the past year, to $1.425 million. That amounts to a decline of about $15,000 per month, and it brings prices back to levels last seen in April, 2016.
If there’s any good news here it’s that, on a seasonally adjusted basis, home sales rose 5.9 per cent in April from the month before. But prices didn’t follow the trend, and either fell or stayed flat from March to April.
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In a now-familiar refrain, REBGV President Ashley Smith pointed the finger of blame directly at government policies, particularly the mortgage “stress test” now in force for all mortgages at federally-regulated lenders.
“The federal government’s mortgage stress test has reduced buyers’ purchasing power by about 20 per cent, which is causing people at the entry-level side of the market to struggle to secure financing,” Smith said in a statement.
“Suppressing housing activity through government policy not only reduces home sales, it harms the job market, economic growth and creates pent-up demand.”
But not everyone believes the stress test is the primary cause of the slowdown. A study from the Bank of Canada that looked at the flow of money through mortgage markets between 2015 and 2018 concluded that the stress test is responsible for less than a fifth of the decrease in home sales over that time.
The Bank attributed the vast majority of the slowdown to rising prices and mortgage rates that have pushed many properties out of affordability range for buyers.
But a report from TD Bank paints a different picture, suggesting the test was responsible for “sidelining” 40,000 buyers, who now have to save up longer for a down payment. Economists at the bank say the new mortgage rule had the biggest impact on first-time buyers and on Toronto and Vancouver, where buyers are most likely to have to borrow the maximum they can.
Other market observers point to the near-disappearance of demand from foreign buyers following the province’s foreign buyers’ tax in 2016 and more recent measures, such as Vancouver’s vacant home tax. That tax has apparently led to many large homes being rented out below market prices.
Some market observers have suggested Vancouver’s correction has some way to run yet. Ed Devlin, head of Canadian portfolio management at investment firm PIMCO, recently warned of “particularly significant declines” in house prices as foreign buyers abandon the city.
“The things that are concerning us … is that there have been a number of local regulations and taxes put in place that have converted Vancouver from probably being the preferred place for Chinese capital flight into real estate to now being openly hostile,” he told BNN Bloomberg.