January 2010 Vancouver Real Estate Market Report

Happy New year!

Now that 2010 is here we can look back at 2009 with the clarity of hindsight. 2009 was a year in Vancouver Real Estate few could have predicted. Vancouver's real estate market became virtually paralyzed in September 2008 as did financial and real estate markets around the world. For several months it became virtually impossible to assign value to property given the almost complete absence of sales transactions. Listing inventory soared. Prices slid 10% to 20% in most cases and as much as 30% in some cases where panicked sellers let their properties go at previously unimaginably-low prices.

Recovery

Luckily, this severe panic was short-lived and a potent combination of low prices, low interest rates and a pent-up demand conspired to transform 2009 into one of the best years on record in erms of both # of sales as well as values. This has been good news for sellers and bad news for buyers as Vancouver real estate prices are once again pushing the limits of affordability. The Real Estate Board of Greater Vancouver (REBGV) reports that total unit sales of detached, attached and apartment properties in 2009 reached 35,669, a 44.8 per cent increase from the 24,626 unit sales recorded in 2008, but a 6.3 per cent decline from the 38,050 residential sales in 2007. The residential benchmark price, as calculated by the MLSLink Housing Price Index®, for Greater Vancouver increased 16.2 per cent to $562,463 between Decembers 2008 and 2009.

Buyer Phsycology

The real irony of 2009 was that when prices were at their lowest between January and March, active listing inventory had ballooned - providing improved selection and choice and interest rates were at an all-time low, there were almost no buyers to be found. Fast forward to late summer when prices had recovered, active listing inventory had decreased and buyers were once again lining up and competing in multiple-offer secnarios that pushed some home prices more that $100,000 over asking price and one thing becomes clear: real estate is a game of phsycology. People love to compete and in general, nobody wants to be first on the dance floor. People want what other people want. As adults we think were so different from the droves of young people driving from bar to bar looking for the one with the longest line-up. I think not.

Looking ahead

As 2010 dawns we look ahead into a year for which even the most well-known economists are hesitating to make predictions. We are now in uncharted territory: unemployment is at record levels and the golbal banking sector is still trying to find its footing. The "shadow" housing inventory in the USA (properties repossessed by banks but unsold) is estimated to be as high as 7 million homes and growing, consumer credit will likely become a problem in 2010, the commercial real estate crisis is a serious problem and as interest rates rise so will mortgage defaults, both sub-prime and prime. Canada's dollar wants to jump above the greenback and this would slow Canada's recovery, total lost wealth due to real estate value losses total in the $Trillions and yet Canadians are spending as if nothing ever happened. As the saying goes, "This too shall pass". I share the view that 2010 will be the last hurrah and that as rates increase and demand tapers, we will see a settling of prices and a return to slow future growth. Many experts are warning of a growing bubble in Canadian real estate and are concerned that Canadians are becoming irresponsibly, over-leveraged.

The Risk

In terms of downtown condo activity in 2010, I am one who sees a wave of active listings on the horizon. Countless "investors" who bought condos downtown during the past 5 years, bought with the Olympics in mind and if I only had a penny for every one I heard talking about holding their properties until after the games...... Add to this potential investor sell-off the thousands of unsold condos at Millenium Water (and at least a dozen other local developments), rising interest rates, the looming HST tax and a new global scepticism surrounding real estate, and it's entirely likely that we'll see a surge of listings this Spring and Summer in conjunction with softening prices. If these factors do all conspire, look out below!

The Bottom Line

The bottom line is this: The big money has already been made in Vancouver's condo market. Those of you waiting to further your gains in the short-term or recover more of your losses stand to be dissappointed. Spring 2010 will very likely be the last push after which many reports predict a 10%-20% pull-back into 2011 in the Canadian housing market overall. If this comes to fruition, those of you who cash in early will be the lucky ones and as is always the case, the piggies will get slaughtered. If you're thinking long-term, hunker down and enjoy the ride.

If you'd like more information or would like to share your opinion on this piece, please email  shaun@shaunkimmins.com

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