Believe it or not there are almost 3 times more hits on google for Vancouver, Real Estate, Crazy as compared to Canucks, Slumping…. And this is in a city where the Canucks take up 80% of the sports section. Why has there been so much talk about Vancouver Real Estate prices lately and why do they appear to be so high? Here is a list of reasons why I am seeing prices trend upwards at a rate that we have not seen before.
1) Interest Rates
Interest rates are at an all-time low. in 1981 interest rates were almost at 22%. That would be the equivalent of buying a house on a credit card nowadays. Today we see interest rates as low as 1.99%. This is almost free money when you think of it. Where else can you borrow money at this rate? Maybe the bank of mom and dad but aside from that this is as cheap as it comes. This in turn enables the population looking to buy to be able to afford more and in turn enables people who previously were not able to get into the market the ability to get a high enough approval.
2) Foreign Investors
If you google, foreign investors, vancouver real estate you will get over 1 million hits. This has been a huge point of discussion in the media for the past few years as many people are pointing to this stream of money as being the sole reason prices have escalated. Unfortunately we do not have a very good database of records to prove one way or another. You can’t assume that anyone with a foreign last name on a property title is from outside of the country and the rules and regulations are lacking to help monitor this. One thing that is certain though is that migration to BC is pushing prices up as well as those who are parking some of their money in what are known as “vacant homes”. After all Canada is a safe country with a stable economy and Vancouver is the most desirable city in the country so why wouldn’t people want to invest here?
3) Lack of Inventory
This is likely the main reason why prices have been skyrocketing. There have been so few listings on the market that they are getting an abundance of buyers through in just a few days and almost always, multiple offers. In multiple offers prices tend to inflate quicker than what may be normal and in this case we have had almost a year of multiple offers. Think of them like a silent auction. Once you lose out a few times you may be willing to throw all your cash down to make sure you get the next one. This cycle will continue until we get more inventory.
4) Canadian Dollar
Our Canadian dollar is very low. This is a great thing for tourism which brings more people to our city (and gives them a chance to fall in love) but it also enables Americans, Chinese, and others to purchase at almost a 30% discount. So if our prices went up 25% in the past year the Americans are still getting a deal.
5) Bank of Mom and Dad
As parents sell off their family home to downsize they have been able to help their children purchase their first family home. I have come across young families that are getting 50% of the purchase price gifted from their parents to help with the downpayment for their first home. Baby Boomers in the city that own their properties are sitting on large sums of money and often times are happy to help their kids purchase their fist home
6) Vancouver is Great
When you look around the world our city is actually not over priced in comparison to other major cities in the world. We are consistently ranked as a top 5 city in the world but when you compare our prices to San Fransisco, Chicago, New York, London, Paris, Hong Kong, Singapore, Sydney…. the list goes on… we are relatively inexpensive. So when you have people stop by Vancouver for a visit from other major cities there is no doubt that they fall in love with our world class landscape. I have seen couples stop in for a day during a cruise to Alaska and love the city so much that they make an offer on a condo that maybe one day they will retire to.
There are a variety of factors that go into play when prices increase by over 20% in almost all areas of the Lower Mainland in one calendar year however these are the 6 that I see being the biggest factors. Are these going to change soon? I don’t see anything happening in the immediate future to slow this down. Interest rates will be a big one in the future but all trends point to rates staying low for 2016. Possibly cutting down on foreign buyers but this is a difficult task to do as money comes in and out of this country daily and tracking it will be a nightmare.
I believe we will still continue to see upward movement on prices for the remainder of 2016. If something causes more inventory to hit the market then we may get away from multiple offers however this is a big “IF”. As difficult as it is to afford to live in the city I believe it is the future for our generation. Most first time home buyers don’t expect to buy a 2000sqft Brownstone in Manhattan but rather they commute from Jersey or the Boroughs. This is where we are headed and the quicker we wrap our heads around the fact that Vancouver is not so much overpriced as the workers are underpaid then the faster we will be able to see more on the news aside from a variation of “Real Estate Prices Hit an All Time high”.
If you have any questions regarding Vancouver Real Estate Prices or any I am always available.
Casey
