Despite a 5.7% increase in home unit sales, the average selling price fell across Greater Vancouver

If you'd like to view a YouTube video from the REBGV highlighting the sales for Jan 2015 you can find it here (copy & paste):

https://www.youtube.com/watch?v=mgeOtd6gwWA&feature=youtu.be

Vancouver, BC – February 11, 2015.

The British Columbia Real Estate Association (BCREA) released its 2015 First Quarter Housing Forecast Update today.

"Stronger economic conditions both at home and abroad combined with favourable interest rates and population growth are expected to bolster housing demand over the next two years,” said Cameron Muir, BCREA Chief Economist. “After a year in which housing demand ratcheted higher across the province, the retrenchment of oil prices is expected to attenuate housing demand in some regions while bolstering it in others."

Multiple Listing Service® (MLS®) residential sales in British Columbia are forecast to rise 2.4 per cent to 86,050 units this year and a further 3.9 per cent to 89,400 units in 2016. The ten-year average is 82,100 unit sales. A record 106,300 MLS® residential sales were recorded in 2005.  

The average MLS® residential sales price is forecast to rise 4.5 per cent to $594,000 this year, with most of the upward pressure being exhibited on the South Coast. Elevated consumer demand is expected to be partially offset by resale inventories and additions to the housing stock in 2016. As a result, the average MLS® residential sales price is forecast to increase by 2.4 per cent to $608,500 next year.

Foreign investors get more for their money, while interest rate cut makes homes more affordable for locals

The low dollar, the interest rate cut and the recovery of the American economy should mean good news for the real estate markets in most places in B.C., experts say. But the plummeting cost of oil and the resulting instability of the Canadian economy could hurt domestic demand and spell bad news for resort areas such as the Okanagan, which rely on people from Alberta buying vacation homes.

Dan Scarrow, vice-president of corporate strategy at Macdonald Realty Ltd., who is based in Shanghai for the Vancouver real estate company, said he has been talking to clients in mainland China about the dropping Canadian dollar and what it means for their plans to buy real estate in Vancouver.

“From their perspective, it’s nothing but good news because it means a 20-per-cent decrease in prices in renminbi terms. Even clients who a year ago thought the market was overvalued are seeing more of a bargain now. It’s just the reality,” he said. “I was talking to a client yesterday who has been looking at a (Vancouver) property for a month. A month ago, he said he would take it if he could get it at 10 per cent off (the ask price). The seller didn’t want to take off 10 per cent in Canadian dollars, but I’m meeting him again on Friday, and with his currency going up in the last month, he may get his price in renminbi.”

That said, “instability is the largest negative consequence” in the current slide of the dollar. “People don’t know where it is going even though there is an expectation it will keep going down. For example, there is this guy looking at a pre-sale condo (in Vancouver), so he would have to come up with the deposit and lock in the Canadian price now, but wouldn’t be transacting for another year when the Canadian dollar should still be going down,” said Scarrow.

These kinds of currency changes impact a small part of the market, but for these foreign investors, “it’s prime time to bring more money over when their currency is strong.” Andrey Pavlov, a professor of finance at Simon Fraser University, agrees. “For foreign investors, it’s a pure discount. They don’t care about the Canadian economy.”

But he said low oil prices are making the Canadian economy unstable, which will make it harder for people who already live in B.C. to move up, or for Canadians from other parts of the country to retire in B.C. While he’s not sure if it would entice large quantities of Americans to buy vacation homes in Whistler, he said Whistler will benefit anyway because it will be cheaper for tourists to visit - everything from ski lift tickets to meals in restaurants will be discounted for foreigners.

How the low dollar plays out in real estate could vary significantly in different areas of the province, said Tsur Somerville, director of the University of B.C.’s Centre for Urban Economics and Real Estate. There is a difference between the decision to purchase a luxury ski chalet in Whistler and the decision to purchase a home in Vancouver with the intention of immigrating to Canada, Somerville said.

“(The low dollar) makes the prices in Vancouver seem less expensive for foreign buyers, which means that people will be more willing to pay a higher price,” Somerville said. “It’s got to play in the same direction, but I’m not sure the magnitude is as large or as dramatic as it would be for the resort markets. The resort market is a luxury purchase, which is much more personal economics and price sensitive. “With immigrants, they say they make the decision to move and then they worry about the price. That affects what property I get, not whether or not I’m going to be there.”

Both Pavlov and Somerville said the instability in the Canadian economy could hit the Okanagan resorts that attract buyers from Calgary and Edmonton might be negatively affected. “For those places that depend on Alberta resort money – there’s not a lot of Alberta resort money at $50 a barrel oil,” Somerville said.

Bal Atwal, a commercial realtor at Avison Young who specializes in the sale and acquisition of investment properties in B.C., said: “It’s a number of things. Essentially the low dollar leads to two factors: it will help attract even more investment and it will make it harder for local Canadian investors to invest in the U.S.,” he said. 

“Interest rates are at record low and this will translate into a very hot real estate market. If local Canadians can’t go (as easily) to the U.S., they will have to look locally, but as foreign investment is even more attracted to this market, there will be more competition.”

The sinking Canadian dollar and what it says about the wider economy is a “legitimate concern,” said Atwal, but it’s also true “that that is the macro economy, and if anything, when there is uncertainty elsewhere (ie. in other investments), people tend to fall back into the bricks and mortar of the real estate market.” 

“If the dollar is falling, people go back to the real estate market as a safety net. It’s always been that way and it’s going to be even more so because of the falling dollar.”

The Vancouver Sun

Home buyers remain active despite reduced selection