2016: A Whole Lot Of Ups and Downs..
What a roller coaster ride it has been! While the first half of the year continued the meteoric rise of values in homes, strong government intervention starting in August signaled the slow transition to a more ‘balanced market’. Still, with our team’s 6 sales in November, our experience has been that there is still plenty of life in the market, with condos particularly remaining strong at the lower price points. That will no doubt be helped by the recent news the BC Government will giving up to $37.5k loans for first time home buyer’s downpayments – interest free for 5 years! This could have a very strong effect on the condo market, so watch out for that in the new year. I will take a bigger look at this offering at the bottom of the article.
We are still looking at a cooling market for the new year. Interest rates are starting to creep up, and supply is more closely matching demand. The good news is that for all the aggressive adjustments to the market, overall the reaction has been moderate and cool-headed.
Major Take-Aways from the 2016 Market
After gutting the foreign buyer demand, severely restricting mortgage approvals, market has remained resilient.
A run of 2+ years of crazy price increases has come to an end, if you were considering realizing your investments, do it now.
Condo demand may remain strong with new first time home buyer loan program.
Vancouver is having an awkward growth spurt, look for areas where it’s showing maturity (updated community plans, new malls and infrastructure upgrades).
Prices Around The City (1 Year):
|Area||1 Month Change||6 Month Change||12 Month Change|
Looking To 2017 and the 1st Time Home Buyer Loan Program
2017 should be a very interesting year. After such a strong run it will be interesting to see how much the market cools. Preliminary reports suggest a fairly soft landing with a potential dip of 6% over the year (mainly on the higher end of the market). That should bring better opportunities for buyers to get in with less competition, and even recent purchasers should feel quite comfortable with such a moderate bear market. Every up market is followed by a down market, regardless of the type of investment, and a 6% down vs 30% up shows that the previous gains were not all hysteria, and local based demand that will remain strong.
Looking back at the government intervention we’ve had this year, there has been a lot of negativity and cynicism which is easily understood. It is hard not to be cynical of politicians, and there is little doubt that the changes are meant to spur their re-election bid. The question remains though, were these effective changes? I would argue that these were exactly the changes the public demanded, and they target 3 of the 4 risk factors that were effecting affordability. Foreign demand has been reduced substantially, the risk of interest rate change has been addressed by the ‘stress test’, and now to counter-act the stress test, as well as increasingly tougher mortgage approval, first time home buyers will get a new loan program from the government. This leaves the density issue as the final risk factor standing in the way of better affordability. As much as I am loathe to applaud the government over their handling of the market, I would argue that density is the one thing the government couldn’t effectively push, and really it’s a public issue that we need to all grapple with.
There is large push back from density attempts, with NIMBY (not in my back yard) and strong resistance to most development applications. We are a city going through an awkward teenage growth spurt. The sheer extent of suburbs pushed up against city center is just not sustainable. That is why one of my main take-aways of 2016 is to look at areas where official community plans, and new developments are pushing a more mature vision for the future. A vision where jobs, schools, conveniences and housing are within walking distance and transit is easily accessible and fast. Once we hit the 20’s (both figuratively and literally the 2020’s) these priorities will start to make sense to the majority and these neighborhoods will become more sought after and valuable.