Emily Yao admits to disappointment when her bid on a three-bedroom condominium in this desirable West Coast city was turned down last October. But a month later the systems programmer, who moved to Vancouver from mainland China six years ago, snapped up the still-unsold condominium on Vancouver’s East Side for $550,000, a difference of $9,000 below the original price tag.
It’s a pattern being replicated across the Pacific port city, in a dramatic turnaround from the bidding wars, show day stampedes, and above-market offers that long dominated North America’s costliest property market.
“Since October, it was like someone turned off the tap. It became absolutely dead,” said long-time realtor Pam Allen.
What’s taking the sizzle out of Vancouver prices and putting the brakes on sales are expectations that rock-bottom Canadian mortgage rates will stay low, so there is no rush to buy.
At the same time, Chinese investors, who have long helped to underpin the city’s red-hot market, are holding back because property market curbs back home means they have less cash available.
But with immigrants still streaming in from China and elsewhere, and the city frequently rated one of the most livable on the planet, most experts see prices fizzling rather than imploding with a bang.
No official figures are available on the percentage of Vancouver home sales to investors from mainland China or Chinese immigrants. But local realtor Tom Gradecak says that in popular areas such as the West Side, a leafy block of land flanking the university, it could be 50 per cent, rising to up to 75 per cent for homes selling for more than $3 million.
“Chinese money is a big factor … today as it was in the period after 1986,” said David Ley, author of the book “Millionaire Migrants”, which examines the impact immigrants had on Vancouver’s housing market.
“House prices in greater Vancouver bear no relationship to the local labor market. Prices are kept high by offshore capital arriving from immigrants and from foreign investors.”
Despite a mid-recession dip around 2008, Canada’s housing market has remained resilient for the past decade, and the Vancouver market has outperformed the rest of the country for seven of the last 10 years.
Vancouver price rises peaked at a stunning 19.8 per cent in 2006, dipped in 2009, and came roaring back with double-digit growth in both 2010 and 2011.
A house bought for $500,000 in 2001 would have fetched about $1.2 million a decade later, based on average price changes.
But the latest month-to-month figures show Vancouver prices fell in five of seven months from last June to December, including drops of more than 5 per cent in November and December.
There is always talk of bubbles, of course, but experts don’t see the Vancouver market crashing as the U.S. one did.
“I would anticipate Vancouver house prices falling further. We don’t know by how much,” said Sal Guatieri, senior economist at Bank of Montreal, co-author of a report entitled “Will Canada’s Housing Boom Forge On, Fizzle Out, or Flame Out?”.
“But that is one area that appears ripe for some sort of correction, though we are not anticipating a severe correction.
Realtor Tom Gradecak, who specializes in property in Vancouver’s pricey West Side, says it is too early to see any impact here, though he expects there will be some domino effect. In the business for the past 20 years, he remains sanguine about Vancouver’s real estate prospects.
“We will see ups and downs, but I think five years from now the prices will be higher than they are today,” he said.
- from ‘Vancouver home prices to fizzle, not pop’, Reuters/Vancouver Sun, 9 Feb 2012
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Don’t you think the joker laughs at you?”