Vancouver RE Prices – Where is the Support?

REBGV headline detached averages have dropped from peak $1850 K to current $1486 K, about 17%.
Sleuths such as @VanREflipflops have revealed many examples of substantially higher drops.
At what price levels will support come in? and from where? and when?…
All of this currently speculative (cough, cough).
Using the price chart and other past markets as a guide, REBGV headline detached prices (real, adjusted for inflation) could drop back to support determined by prices seen in 2013 (-45% from peak), 2009 (-60%), or even 2003 (-78%).
This will still seem incredible to most, but it is the lesson from comparable speculative manias.
Are locals going to be lining up to overextend themselves into RE anytime soon? If not, prices still have a long way to drop.
– vreaa

24 responses to “Vancouver RE Prices – Where is the Support?

  1. We are in the second or third inning.

    Talking to average folks, one notices a lag between reality and perception. Although the fever pitch of chatter has moderated, many BC’ers still seem spellbound by “real estate” as a special and reliable path to wealth. The bubble has lasted so long, and the indoctrination has run so deep, that these thinking patterns are slow to die. But die they will.

    • Nathan Horton

      I feel the same as you. I was previously spell bound by real estate but thankfully I sold over 2 years ago. This bubble bursting will deliver a crushing blow to our economy. I don’t think anybody is prepared for this. I wonder what the BOC will do to try and mitigate this?

      • I’m guessing BoC/govt will do:
        – interest rates down, down, down
        – reduce stress test (when there’s no risk of higher rates!)
        – further special deals for FTBs and anyone else
        – CMHC mods like longer amorts
        – any and all increasingly desperate measures to try to reverse the unstoppable and ward off foreclosures

        If all the might of the US could not stop their US housing crash, how can Canada do better?

        Speculators won’t buy into a falling market. Money launderers must be moving their business to greener pastures.

        Once sentiment changes among the wider population, which will likely take further unhideable price drops, nothing can reverse the freefall until it naturally hits levels supported by local incomes. Stand well back from this train wreck.

  2. https://www.residencity.com/r2385955-6450-cedarhurst-street

    On the market for a good two years. Asking price dropped by at least $2 million (maybe more) over that period. No bottom in sight yet for this exceptionally large lot in a prime neighbourhood.

  3. https://www.rew.ca/properties/R2359376/2279-w-47th-avenue-vancouver-bc

    Originally listed at least a year ago for at least 800K higher. Another prime building opportunity, a double lot. NB each of two standard lots on quiet Kerrisdale street now listed for well under $2M — they could end up going for close to 2012 price (which would have been around 1.7M).

  4. https://www.residencity.com/r2365973-2136-w-48th-avenue

    Also two standard lots in Kerrisdale, priced higher than those on W. 47th but still a little below $2M each. Has not been on the market as long. Would seem like an attractive play for speculators given the ongoing redevelopment right nearby on W. Blvd. and E. Blvd. This will be an interesting one to watch.

  5. When considering price supports, it is necessary to adjust for inflation.

    For example, cumulative inflation since 2006 has been ~20%. $1.00 worth of 2006 goods costs ~$1.20 in 2019 currency.

    If a property sells for $1MM in 2006, and then sells for $1.2MM in 2019, it has fully now retraced to its’ 2006 value.

    Because our currency has been devalued by 20% in the interim.

    This is my wishful-thinking / tea-leaf-reading / based-on-nothing prediction: 2006 prices * 1.20 = the selling prices that you will see by the time it bottoms out.

    Worth the internet it is printed on.

    • “Worth the internet it is printed on”

      Good one. If there is one thing missing on the internet, it is this sort of humility.

      And yet… I think you will almost certainly be proven correct. In fact, prices could overshoot on the downside…

  6. How low will it go? Here’s mt answer:

    Under 750k in a good location: 2013 prices
    Under 750k in a bad location: 2009 prices
    Between 750k and 3M: 2009 pricez
    Over 3M$: 2005 prices

    • The real question is: How could it possibly not?

      Think of all the contributing factors that came and went.

      GONE GIRL:

      -Chinese capital outflow
      -Negative real rate borrowing
      -Stress-testless borrowing
      -40-year amortizations + 5% down + minimal verification + various other looseness
      -The “Priced Out Forever” zeitgeist (never mind 5 months from now when the third negative annual assessment in a row hits SFH mailboxes)
      -Federal, Provincial, and Municipal governments being allowed to plead ignorance
      -China and Canada not having a financial information sharing treaty
      -China not actively hunting its’ nationals in foreign countries by literally going door to door in foreign jurisdictions (!!!)
      -Canadians having less consumer debt than any other country in the world

      We have blown our borrowed money load and are now experiencing post-nut clarity.

      And in the harsh morning daylight, we are realizing that the choices we made at the party were questionable to say the least.

      • There is a great expression in Mexico for the feeling one experiences after a night of boozing and shall we say, a regretful romantic encounter:

        “Cruda moral.”

        A “moral hangover.”

        Vancouver got blind drunk and is waking up to one helluva cruda moral.

  7. I hope there is a big correction in Vancouver and Toronto, but I thought we would have corrected in 2010-2011, but it’s been off to the races. I’ve been a student of bubble analysis, but it hasn’t helped me understand Toronto and Vancouver’s run up in recent years, while others who are oblivious bought in and profited (at least on paper for now). Fundamentals analysis has failed. I don’t know if psychology as turned enough yet, and interest rates seem to be heading down, and gov’t want to do everything possible to prop this up because RE is the Canadian economy. I don’t sense a major change in psychology in Toronto. Either way, it will take years of declines to reach a bottom, so I will continue renting for quite a while.

    • It has definitely defied expectations. But at some point fundamentals reassert themselves. It’s happening now, with prices in some markets off 40% from peak. And I don’t think the government can stop it. Kick the can down the road, maybe. But they can’t stop it.

    • Time and tide wait for no man.

  8. Where’s Arnie? I miss him.

  9. What do you think about the potential fly in the ointment of a further correction —
    1. lower for longer, near zero interest rates
    2. Crisis HK money going in to Vancouver and GTA real estate. Do China cap controls limit HK flight money?
    3. the currency wars continuing to depreciate what our dollars can buy, boosting “safe” assets even further. Some people say the next recession will be inflationary, where assets prices move up further and cash loses value. That would be a bad secenario for someone sitting on the sidelines to buy. My mind is still that prices have to be supported by local incomes at some point but this world is crazy, traditional economic ideas don’t seem to hold, and people are losing trust in fiat money.

    • All good questions. These factors could be supportive, but now that the trend has turned negative and psychology is shifting, they may not be enough to revert the slide. At least not for speculators. People who are just looking for a house to live in will continue to buy regardless.

  10. What’s up vreaa? Hope all’s well.

    • Hi All
      Thanks for asking. Yeah, all is well, thanks; I’m still here, watching the paint dry…
      Like many of you I’m following the market, and a few sites, that suggest ongoing price weakness… Forgive me for posting so infrequently, it’s probably a function of the drifting market. I’ll pop a new post up when next struck by something landmark… My overall thesis remains much the same… prices still at way too high levels when considering underlying fundamental value (however you measure that)… Still anticipating a reconciliation of price and utility value of property… will obviously take time.
      In the meantime ensure you’re enjoying life.
      And remember: In the long term, we are all renters.
      V

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