Looking Ahead: Vancouver Real Estate Market Update

With 2011 in the history books, it’s 2012 and the earth continues to spin, so at least for now it appears that the Mayans got it wrong.

They are not alone when it comes to failed predictions. From where I sit, it appears that the vast majority of economists and investors have been somewhat bamboozled by recent world markets. Similarly difficult to predict, Vancouver’s real estate market continues to move along a mostly positive trajectory, albeit a little more slowly, in contrast to real estate trends in much of the rest of the developed world.

This spectacular market rise and more recent signs of abatement have left some overzealous speculators in uncomfortable positions and others priced-out of the market altogether. 2012 may well prove to be the beginning-of-the-end for the historic run of Vancouver real estate values, but the end of the earth? I think not.

Statistically Speaking

According to the Real Estate Board of Vancouver’s latest stats release on December 31 2011, “The 2011 Greater Vancouver housing market began with heightened demand in regional hot spots and concluded with greater balance between seller supply and buyer demand.” I would agree with that. In December 2011 the sales-to-listings ratio measured 45% and there were 6 months of active listing inventory. Flatter price trends resulted.

They also stated that, “Sales of apartment (condo) properties reached 774 in December 2011, a decline of 4.6 per cent compared to the 811 sales in December 2010, and a decrease of 32.9 per cent compared to the 1,154 sales in December 2009. The benchmark price of an apartment property increased 3.7 per cent from December 2010 to $401,396.”  I would agree with that in part but I also say that not all condo values moved equally in 2011. Unique, desirable properties garnered much more attention than the rest of the herd.

In 2011, Coal Harbour condo sales totaled 336. 2010 sales totaled 294 and 2009 sales totaled 365, so 2011 was a relatively good year, all things considered. For all of downtown, condo sales totaled 2,776 for 2011, 2,806 for 2010 and 3,390 for 2009. We saw a surge in our team listings and sales – from June through September – which contradicts reports that the market had gone quiet by April. The Coal Harbour market switched off like a light at the end of September and has now begun to awaken.

In our experience, sale prices were slightly higher than those of past years but not by a lot in most cases. We did see a few values jump up more significantly in complexes where a handful of panic sales from 2008 had temporarily set values artificially low. As of January 19th, 2012 there were 929 active listings in all of downtown, 178 in Coal Harbour, 372 in Downtown, 166 in the West End and 213 in Yaletown. Active listings in Coal Harbour fluctuated between approximately 180 and 200 for most of 2011. New listings are being added daily in all areas.

A dominant trend for buyers in 2011 was a preference for well-priced, professionally-staged listings. In several cases, we received multiple offers and record sale prices for luxury condos that were presented in this way.

Our recent experience

Typical non-resident buyers are investing for the long term as a hedge against political and economic uncertainty in their countries of origin. Canada’s combination of a stable economy and the world’s soundest banking system has underpinned Vancouver’s already attractive real estate market and has proven irresistible to many of China’s newly wealthy.

Sales to such investors have typically involved an initial offer with a relatively low starting price paired with a quick closing. This is usually followed by a heated negotiation period, often spanning several days. Such negotiations frequently involved one or both parties “walking away” for a cooling off period prior to a final deal being struck.

In many cases though, the parties returned to the table and came to an agreement. These cross-cultural negotiations require patience, fortitude and expertise. It’s important to understand and respect that buyers of varied cultural origins, often conduct their business in ways very different from those of the seller(s). This reality underscores the importance of engaging a realtor who is familiar with these varied cultural business practices.

Many of our team’s sales in 2011 achieved record prices for similar properties sold within their respective developments. There are several key ingredients needed to achieve a record sale price. Firstly, tactical, intelligent pricing is critical. Vancouver’s condo market is far more sophisticated than many local ‘fishermen’ seem to realize.

Secondly, as mentioned above, the presentation of the property is critical. Paint, flooring and professional staging produce phenomenal outcomes. Thirdly, and most importantly, your choice of Realtor is paramount. I can’t overemphasize the importance of employing an agent who is experienced in luxury real estate transactions. Buyer and seller motivations and the sale process itself differs significantly from neighbourhood to neighbourhood and property-types within a specific area.

With the possible exception of ultra-high end condos, if you decide to sell in this year’s spring/summer market and you’ve priced right, you should receive an acceptable offer within 30-45 days. You should be seeing at least five showings per week. If you haven’t received an offer after 45 days, the market has delivered its verdict – your listing is overpriced. Buyers are predictably irrational in that they want what they perceive to be attractive to others. A listing older than 30 days is perceived as unattractive to previous buyers and as a result is less attractive to subsequent buyers. Price right or die on the vine, and remember, you list for the current market not for the future.

The road ahead

Given current economic uncertainty, short-term predictions are difficult, so I do my best to stay out of the predictions game. For 2012, opinions vary wildly from calls for a 30% correction to 5% growth. Barring a complete Eurozone implosion or World War III starting in the Middle East, and as long as interest rates remain low, I expect flat to modest overall growth for the Vancouver market in 2012. In coming years I expect seasonal price fluctuations in the order of 5%-10% while overall market appreciation will be more in line with inflation.

I expect the decoupling of values from neighbourhood to neighbourhood to continue. Prices in neighbourhoods that enjoy focused attention from foreign investors seeking safe havens will outpace those in outlying areas. Owners of homes in more locally-driven sub-markets may even experience slight price decreases. While Vancouver is certainly part of the Canadian real estate market, it’s simply not useful to compare Vancouver to central or eastern Canadian markets. One must consider the specific drivers for each individual neighbourhood and property type.

Is it a good time to buy or sell?

This question can only be answered after a detailed analysis of an individuals’ specific circumstances. Conventional economic wisdom would suggest that the USA, and by default Canada, are headed for inflation as a result of the USA’s quantitative easing policies. If this occurs, hard assets such as real estate should gain value, suggesting it’s a good time to buy now. However, the possibility of a protracted global recession cannot be discounted and market volatility remains elevated. In turn, we could see an extended period of low interest rates and a somewhat more anemic real estate market. In this case it may be a good time to cash in with the thought to reinvesting in markets with greater growth potential. With this scenario, buying for short term gain makes no sense.

Exchange rates are also a major consideration. Many recent non-resident sellers have achieved phenomenal returns on currency exchange. In some cases returns have been
sufficient to offset the non-resident capital gains tax – a potentially complex issue that should be handled by an experienced tax accountant. Kimmins and Associates specialize in the sale of non-resident luxury condos in Coal Harbour and have provided a detailed outline of the tax process: here.

The bottom line is that nobody knows where global economics and more specifically, Vancouver’s real estate market, are headed. So my best advice remains unchanged: after careful examination of your situation, if it’s a good time for you to buy then get the best deal possible and think long term. If it’s a good time for you to sell then price for the market and sell. Don’t mess around ‘fishing.’ Either way, it’s critical that you employ a realtor you trust and who has a track record of transacting the type of property you own or are looking to buy. On behalf of the entire Kimmins team, I wish you all the best for a happy, healthy 2012 and I look forward to hearing from you when the time is right.

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