Home prices are virtually unchanged in the past year
Total sales in Greater Vancouver are up nearly 30% from July 2022
Wily buyers take advantage of a summer sales slump
There are now 16,400 properties for sale across Metro Vancouver
Vancouver density plan invites higher taxes for owners
On July 25 the City of Vancouver recommended a massive rezoning of single-family neighbourhoods to create more of what is known as the “missing middle” housing. The province wants to make such ideological-driven rezoning mandatory in every city in British Columbia with legislation promised to come this fall.
The Vancouver concept would allow four to six homes to be built on most RS-zoned lots, or 60 percent of the city’s buildable land, according to the ‘senior green building planner’ for Vancouver. It also restricts the size of any new detached house. The policy, though, has forgotten the major player in the plan: detached house owners, many of whom want no part of it.
The City of Victoria passed a similar rezoning plan in January of this year. Seven months later not a single application has come forward from a detached house owner willing to turn their private land into a multi-unit rental complex.
Many detached house owners are not willing to risk their financial future and peace of mind by jumping on board a plan that they fear, rightly, will transform their quiet communities and expose them to the federal capital gains tax that could grab up to 50% of their real estate equity for investment properties.
Consider this. The average price of a Vancouver Westside detached house in July was nearly $4.3 million. If sold as a paid-for private residence, the capital gains tax would be zero. But, if the owner divided the house into four rentals and lived in one unit and then sold the property for the same price, the owner would be responsible for capital gains tax as the owner of the income-producing property.
As well, under Vancouver’s missing middle plan, the detached house owner could only produce a “below-market rental unit” or a secure rental unit (which means forever); or pay a “set-rate bonus payment” for the increased density as a market rental. There is no definition of what the bonus payment would be, but currently, in the Cambie area, it averages $135 per square foot for the extra space in a new development.
The house owner would also be subject to the GST on any new construction; would be required to build any new homes under Vancouver’s expensive and confusing “passive house” energy regulations; and would be subject to higher property taxes and utility costs yet would only be allowed to increase rents by 2% per year under provincial regulations. Private detached house owners are somehow, miraculously, expected to deliver what seasoned developers, city planners and other bureaucrats cannot: low-cost rentals in Vancouver.
The City of Vancouver will present its missing middle plan to public hearings in September. Expect a lot of discussion.
Prices are not skyrocketing.
There is a lot of media noise being tossed around about “skyrocketing” Greater Vancouver home prices. While true the Benchmark Price is up about 10% from January to July 2023, to $1,210,700, prices are just 0.5% higher compared to a year ago and in a dozen Greater Vancouver communities – including Burnaby North, Coquitlam, Tsawwassen and West Vancouver – composite prices are lower now than in July 2022. On the bellwether Westside of Vancouver, the July benchmark detached house price, at $3,458,000, was up just 1% from a year ago.
The benchmark condo price this July is $771,600, up 2.7% from last year, but condo prices in East Vancouver, Burnaby North and Burnaby East, arguably the most active condo markets in Greater Vancouver, are up less than 1% from July of last year, which should help convince more buyers to take advantage of the summer slowdown to get into the Greater Vancouver market now.
After peaking in May, sales have declined month by month since buyers have now faced two straight increases in the Bank of Canada rate. Greater Vancouver’s total sales in July, at 2,455, were down from 2,988 in June to the lowest level since March. In the Fraser Valley, July sales fell nearly 30% from June 2023 and benchmark prices are up an average of 1% from a year ago. But even with the decline in sales transactions, buyers still want to buy, and many sellers are not desperate to sell.
As the summer continues, there will be more opportunities than we’ve seen over the last four months for buyers. With many people away or taking a break from the market, it’s the prime time to be a buyer. Inventories have increased, giving more options, especially in some areas.
The increase in the Bank of Canada rate and fixed rates bumping up over the last month or so have pulled some buyers from the market. Those with 60 to 90-day rate holds are trying to buy before those rate holds expire while others are content to wait out the increases in borrowing costs. With travel and the many local events returning occupying many people’s time, real estate is losing some of the attention it normally would get. Of course, the lack of resale inventory continues to challenge the market and while we wouldn’t expect to see it increase during the summer months, the number of new listings dropped while absorption rates remained close to the levels we’ve seen this year, and in some areas increased. July saw 4,757 new listings after June produced 5,466 new listings after there were 5,776 new listings in May. Year over year, new listings were higher with 4,067 new listings produced last July which is helping would-be buyers in the market.
Don’t expect the higher interest rates to result in more listings. Sales of residential land to developers have fallen 80% in the past year, largely due to rising financing costs, which will stunt delivery of new strata homes into next year, at least. As well, the Financial Consumer Agency of Canada and the Federal Government have issued guidelines for Canadian banks to help homeowners facing significant increases in mortgage costs. Measures such as waiving penalties to break mortgages and increasing amortization periods to lower payments are on the table.
Banks do not want to own homes, so don’t expect increased rates to lead to a major rise in mortgage foreclosures or distressed sales.
Instead, serious buyers should be ignoring summer temptations and shopping through the 10,301 active listings now on the market. Buyers can take advantage of a shallow slump and good selection to secure a property now.
Greater Vancouver numbers for July 2023
Total transactions reached 2,455 in July 2023, a 28.9% increase from the 1,904 sales recorded in July 2022. This was 15.6% below the 10-year seasonal average and the lowest level in five months. Total inventory at month end, 10,a301 properties, has moved to a 4-month supply, with detached up to 6 months and into balanced market territory. Townhouses and condos are still at a 3-month supply, though price is key for buyers right now. Looking at year-over-year, sales-to-listings ratios are up while condos remained the same. Overall, the 52% absorption in July is showing strength considering the increase in fixed and variable-rate mortgages. The Benchmark Price for all residential properties is currently $1,210,700. This represents a 0.5 per cent increase over July 2022 and a 0.6 per cent increase compared to June 2023.
For other regions, contact Berna Yazgan.