There have always been challenges purchasing in one of the most expensive housing markets on the planet. It is still possible, though, to find the home or investment of your dreams in Metro Vancouver, and despite the headwinds, this is actually a good time to be purchasing, with the help of an experienced and connected real estate company.
The main challenge is finding a home to purchase.
The big question in today’s Metro Vancouver housing market is not ‘where will the new supply’ come from?’ but ‘why is there such a shortage of homes for sale?’ especially in an environment where buyer demand and price increases are at such a feverish pitch.
This past month we have seen houses and townhouses sell within days for well over the asking price. It is not uncommon for a single listing to attract a dozen or more offers. The demand is coming from conventional buyers wanting to buy their first home or trying to move up to investors and families hoping to buy a second or perhaps a third property as a smart hedge against the highest inflation rate in more than 30 years. But let’s not forget, the investment properties become rentals for a starved rental market and allow developers to build more supply.
Caught in the headlights of this traffic is homeowners who are fearful that if they sell, they won’t be able to purchase a similar or better home because of the shortage of listings and the amazing price parity being seen across the region.
In January, for example, the benchmark price of a detached house was the almost exactly same on Bowen Island – $1.48 million – as in North Delta at $1.45 million. A typical townhouse sells in Squamish, at $936,000, the same as the average price in the Fraser Valley. At just under $600,000, a Sunshine Coast condo apartment is priced at the same level as in New Westminster or Ladner or Cloverdale.
This is the time when a great buyer’s agent is very much worth working with.
Why buy now?
Low mortgage rates are a prime reason to move into the market as soon as you can.
The first step is to get a pre-approved mortgage. It is no secret that lending rates will be rising this year, likely with the first Bank of Canada increase coming by March. Lock in a pre-approval home loan at today’s historical low rates, good for 90 days, right now.
Restrictions are coming: If you are an investor or are buying a second home, there is a very strong chance that the federal government is about to increase the down payment required, in a bid, it says, to curb speculation.
Currently, about one in four homes in Canada is purchased as an investment. With home prices in Metro Vancouver rising about 25% over the past year, investing in real estate is naturally more popular here than in most of the country.
Federal housing minister Ahmed Hussen said in a January statement: “By developing policies to curb excessive profits in investment properties … and reviewing the down payment requirements for investment properties, we are targeting the issues the market is facing from multiple angles.”
Today, an investor can buy a home with a 20% down payment, but this could be increased to 25% or even higher. It is better to buy that investment condo, perhaps a suite for the university student in the family, or other secondary home now before tighter restrictions kick in.
Then there is appreciation. The BC Real Estate Association forecast in January that the average home price in Metro Vancouver, now at $1.2 million, would increase a further 8.1 per cent this year, compared to 2021, and rise again by 3.2% by 2023. This means that a typical buyer could make at least 10% or about $120,000 in appreciation over the next two years. Across the province the composite home price is predicted to top $1 million this year for the first time.
Little competition: Finally, there is little fear of the Metro Vancouver housing market seeing a huge increase in supply. Listings of homes for sale have been declining for months and hit an all-time low in January as just 4,251 homes were added to the market, 19th lowest amount for the month of January. However, 2,329 homes sold, the third-highest for January sales in history.
Despite all the government pledges to increase the supply of homes, total housing starts in Metro Vancouver last year reached 26,103 units while immigration to the area totaled more than 35,000 people. One of the barriers to new detached house construction in Metro Vancouver is that average municipal fees and taxes on a new house which now total $199,000, according to a survey released by the Homebuilders Association of Vancouver in January.
Short story is that when you buy a home this month, it will likely have little competition when you go to sell it or rent it. B.C. has only 425 housing units per 1,000 people in a country that has among the lowest average housing supply per capita in the G7. The Metro Vancouver rental vacancy rate is around 2% and the rental costs are the highest in Canada.
Unnecessary costs and delays continue to hurt supply and contribute to the added price of housing. In January, a local developer lamented that they have waited five years for building approval from the City of Vancouver on a project that includes 20% below-market homes around the SkyTrain. And while the city delayed building permits, they were also being charged $250,OOO in annual Empty Home Taxes. This can make affordable rental projects financially unviable.
Highlights of this Report:
Why now is the time to buy. Really.
Only market where townhouse prices dropped from December 2021: Vancouver East Side (down 3% after a 21.5% increase in the previous 12 months) – expect that to swing the other way in the months to come as lack of available townhouses push prices up again
Greater Vancouver benchmark home price appreciation year-over-year: $234,900
Biggest year-over-year detached house price increase: Surrey, up 43%
Biggest year-over-year detached house sales decline: Surrey, down 38%