Coal Harbour Real Estate Mid-Year Market Update

We’re approaching the ½ way point in 2011 and I wanted to provide some insight into what we’ve experienced this year in the Coal Harbour condo market.

Market overview

2011 has been a better year overall for sellers. After two years defined by market uncertainty, 2011 has been one of renewed optimism among buyers.  Vancouver’s housing market has enjoyed some of the largest year over year value gains we have seen. Active inventory levels are lower and demand has been similar and in some cases higher compared with the previous two years.
Of key importance, however, is to understand that the significant gains some areas and property types have enjoyed are not affecting all areas and property types equally. The overall market is solid and moving along at a good pace while some markets have turned white hot this year.
77 per cent of recent sales over $1-million were located in West Vancouver, Vancouver West or Richmond and the overall benchmark price (board-wide) for detached properties increased 10 per cent from May 2010 to $890,833.  Prices in Vancouver West are up 17% this year alone and 36% over the past 3 years.  One house on the west side recently sold for $650,000 over its asking price. Wow!
What’s driving this mania? In a word: China. Investors are arriving weekly, some with literally tens of millions in hand, looking to buy up houses in mature neighbourhoods and prime condo developments. We are seeing robust sale prices in most condo price categories and realistically priced properties are selling quite quickly. Properties priced unrealistically with no reference to past sales are simply not selling and only serve to drive up active inventory levels.

Active inventory and sales

New listings for condo properties in Greater Vancouver totaled 5,931 in May 2011. This represents a 15.4 per cent decrease compared to May 2010. This is a good thing for sellers.
Sales of condo properties reached 1,228 in May 2011, a 9.3 per cent decrease compared to the 1,354 sales in May 2010, and a decrease of 15.8 per cent compared to the 1,458 sales in May 2009. The benchmark price of an apartment property increased 2.2 per cent from May 2010 to $407,419. The following graph clearly shows the 2011 surge in sales we saw in Coal Harbour in February and March 2011.

Coal Harbour Real Estate Sales - Past 5 Years
Coal Harbour Real Estate Sales - Past 5 Years

Things have calmed somewhat but we are now entering Vancouver’s summer months which can be some of the most productive months for luxury condo sales.

Exchange Rates, Interest Rates and Predictions

One thing is clear, with prices again at all-time highs and exchange rates favouring non-resident USA and European sellers, it’s a great time to cash out at what may be another market top and reinvest in markets that are predicted to bottom in the near future.
According to recent media, as soon as its feasible, the Canadian government intends to raise interest rates. When that occurs prices are likely to reverse their recent upward trajectory. When that will happen, nobody seems to know, but all agree that it will at some point soon.
Headlines are beginning to reappear in prominent publications such as the Globe and Mail:

Vancouver primed for housing correction: BMO

Vancouver’s housing market looks primed for a correction, according to a report from BMO Nesbitt Burns, with the average house now costing “an astounding” 11.2 times a family’s average income -- more than double the national average."

Clearly there are dynamics at play here other than just local income-to-housing cost ratios, however, the Canadian Government has repeatedly expressed concern about household debt levels, leverage and the effect rising interest rates will have on the housing market and overall Canadian economy. So how long will the good times last?
This is really anyone’s guess. What we can say for sure is that the Vancouver housing market is currently being inflated by wealthy immigrant investors. See the Real Estate board of Greater Vancouver’s most recent price graph below:

REBGV Residential Average Sale Prices - January 1977 to May 2011
REBGV Residential Average Sale Prices - January 1977 to May 2011

If and when the Chinese government moves to stem the phenomenal outward flow of money (rumors are that they are looking at this now), current housing price trends are likely to slow significantly if not reverse course altogether.

Musical Chairs

So around and around we go, when the music stops nobody knows. The real question for non-resident investors is, where will you be when the music does stop? What will exchange rates be at that time? In which direction will Vancouver’s condo prices be headed? My strong suggestion is if you are thinking of cashing out of Vancouver’s historic market boom in the near future, now is the best time we’ve seen in the past 3 years to do so.
When it is time to sell, engage the services of a local area expert who will tell you the truth about the market, not sell you a dream. Dreaming in Vancouver’s condo market can be a very costly indulgence. We are here to protect your investment so when it’s time to sell contact Kimmins and Associates and receive a comprehensive, practical market evaluation and marketing plan at no cost and without obligation.

We look forward to hearing from you.

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