by Victor Mozambigue
A year ago, housing was the safest investment in Vancouver. The investment outlook was positive. People were ready to shell out money in the sector too. However, 12 months down the line, the housing bubble of Vancouver has burst and all there is left now are lessons. After a frenzied hype in July 2016, the investors are now pulling out their money in desperation. The data is disappointing and people have now stopped buying new properties in Vancouver.
What does the data suggest?
Homes of all types have experienced a 40% drop in sales in January 2017, compared to January 2016. Detached homes appear to have been hit the hardest in rough times. Their sales have dropped by 58% while attached properties saw a 32% decline. Condos too have not done well with a 25% drop in sales as compared to a year ago. President of the Real Estate Board of Greater Vancouver (REBGV) Dan Morrison simply puts it as a “lukewarm start to the year as compared to 2016.”
#Vancouver is the major city most likely to see its #housing #bubble burst, says Swiss bank #USB #vanre #bcpoli #cdnecon #cdnpoli #ICYMI pic.twitter.com/MR12JkbpVz
— DouglasTodd (@DouglasTodd) February 8, 2017
Homeownership idea is not selling hot in Vancouver anymore. Even though sales have dropped year-over-year, the number of homes listed for sale in January has grown to 4,140 homes, registering a 7% rise. The total number of homes listed has risen to 7,238, marking a 9% rise. The Vancouver housing idea has no more buyers. Even the benchmark price used by REBGV has fallen by 7% this year.
Is housing investment not hot anymore?
Investment in housing sector is still good, just not in Vancouver. Toronto is still getting money for its real estate. Sales in January have jumped by 12% by the MLS system. This year-over-year number is now 4,640. Per Larry Cequa, Toronto Real Estate Board (TREB) President, “As we move through 2017, we expect the demand for ownership housing to remain strong.” Vancouver was as enthusiastic about the sales last year till everything fell apart.
The supply problem
So, what makes the Vancouver housing bubble burst? The truth is that supply was low when the bubble first started forming. When investments started pouring in at an unprecedented level, more people started to put their property up for sale. Speculations began and investors were willing to sell their properties again, this time on a bigger scale. The problem with real estate in Vancouver was really a problem of supply. Toronto and the Greater Toronto Area have a supply problem. The number of active home sale listing has been slashed by 50% in January. This means that supply is more restricted than ever and 2017 will see more growth in real estate prices in the area.
Chinese investors were flocking to the Vancouver housing market so British Columbia levied a 15% transfer tax on non-resident buyers. As the Chinese pulled back their investment, the housing bubble pricked and moved on a fatal path. Within 5 months, the housing market fell flat on its face. The government has tried to revive the market by offering interest-free debt to permanent residents and Canadian citizens buying home for the first time. However, because of a hefty down-payment and two mortgages, it didn’t work out.