Number 9 in NEWS 1130’s Top 10 of 2017

VANCOUVER (NEWS 1130) – No bubbles burst in the Metro Vancouver real estate market in 2017, and despite measures enacted by all three levels of government, average prices have continued to rise regionally, particularly in one sector.

“The biggest surprise of the year, of course, has been the change in condo prices,” says Thomas Davidoff, an associate professor at the Sauder School of Business at the University of British Columbia.

LISTEN: Mike Lloyd brings us number 9 in NEWS 1130’s Top 10 stories of 2017

 

“People thought that in the wake of the foreign buyers’ tax and an initial move to limit mortgage loans that prices were going to come off in all sectors. That has been far from true, particularly at the lower end, but all kinds of condos have really exploded in prices since February of this year.”

That surge in prices has fueled speculation that offshore investors may be focusing on condominiums.

“It’s an interesting question whether the foreign buyer has moved into presales looking to flip. Are they end users, are they locals looking to flip, are they foreign buyers looking to flip? It’s very hard to get any data on that and time will tell in 2018 — and probably more so in 2019 — as a lot of the buildings under construction are completed,” says Davidoff.

2017 also saw the implementation of the “empty homes tax” in Vancouver, aimed at loosening up the city’s tight rental market by encouraging owners of homes that sit empty more than six months per year to rent the space or face a levy equivalent to 1 per cent of the property’s assessed value.

“The empty homes tax was authorized by the province in 2016 and the letters went out early this year with further announcements this past summer. It looks like maybe a bit more rental inventory has been coming on in the city but the big question is how many homeowners are actually going to pay. It could be a lot of revenue for the city.”

At the federal level, Ottawa announced this year it would be further tightening mortgage rules with new guidelines coming into effect next month that will require uninsured borrowers to undergo a financial ‘stress test’ before securing a mortgage.

“It’s hard to tell what the impacts will be overall. First of all, November and December — the period after the rules were announced — tend to be slow anyway so its probably tough to detect an impact yet. Moreover, when you announce in September that come January you are still going to have to qualify under the stress test if you have an uninsured mortgage, that should make condos less valuable. On the other hand it makes people want to buy sooner so they can lever up. It will be interesting to see if we get a dip in condo sales next January and into the spring.”

In February, the provincial government started offering first-time home buyers loans up to $37,500 with no interest or payment necessary for five years to help them afford a down payment on homes worth up to $750,000.

The money matches what buyers have saved for a down payment, but with worries that Canadians already carry too much debt, critics say the former Liberal government’s plan works against the federal government’s moves to cool off the housing market.

Will any of these measures have a significant effect on Metro Vancouver’s real estate market?

Davidoff suggests we will have to wait and see.

“The city, of course has the empty homes tax in place and they’ve just started to say they’re going to get serious about adding more rental housing and moderate density homes throughout the single family neighbourhoods in Vancouver combined with an already very large condo inventory already under construction. All that new supply may have an impact but that will be a few years out,’ says Davidoff.

“In the short run, tax measures can have a lot of impact and we’ll see whether the province is going to act and raise property taxes on people who don’t pay income tax and aren’t landlords a round Greater Vancouver as they promised in the campaign. A lot of us think that could have quite a bit of impact, both raising revenue and delivering homes to locals. We’ll see whether that gets enacted or not.”