Home sales have fallen, but I don't see much in the way of home prices falling. Yet at least. The house two down from me is a 3 bedroom, 2700 sq ft pink stucco beauty on the market for $1.8M. I'm keeping my eye on it to see what happens. Houses around here typically sell within a week of being on the market. This house has been up for two weeks, so even that's exceptional. IMO, there is no real bubble. Not for real estate prices or mortgages at least. A bubble insinuates that people are leveraged beyond their means in an unsustainable way that would cause a crash and I'm just not seeing that here. The bubble in question is more for the realtors and speculators of the market. I do think that there will be a general correction of home prices, but that they will still be out of reach for most people - including myself. It is interesting, however, to see the psychology at work here. No one knows for sure, but some say that foreign buyers count for a very small percentage (5%?) of the overall market. This in turn though has increased neighboring property values and created bidding wars on nearly every new home. The perception is powerful. Either way, the kind of growth seen in the last few years was simply not sustainable. Something had to give.
IF: 597 homes sold last August in Vancouver AND: BC started levying a 15% surcharge on foreign sales between last August and this August AND: 87 homes sold this August in Vancouver THEN ... well, correlation does not imply causation but if the whole point was to stop foreign speculation and ...I mean, the "very small percentage" theory is kind of debunked. For those of us who spent time in Vancouver before and after the return of Hong Kong to China, allow me to say that I find the idea of minimal foreign participation in the Vancouver market to be outright laughable.The descent in housing sales is being perpetuated by China’s State regulated media which is warning Chinese buyers of the dangers of owning Canadian real estate.
Yeah, I think you're right kb. And like I said to mk, my feeling is that their participation is closer to 25%. That 5% was taken from a dubious BC government study that was done with not enough sampling and in too short of a time frame to get an accurate sense of the market. Ultimately doesn't matter because that only tracks foreign buyers anyway. What is more important is the foreign money, which is more likely funneled into the country through other means and difficult to trace. It's even crazier than that. The tax went into affect on August 2nd, this year, with very little warning. So while June and July also had a slow down, August had a precipitous, jaw-dropping slow down. But it's not likely that the 510 homes that weren't sold this month falls entirely on the shoulders of foreign buyers. The way I see it is that the foreign buyer has kind of become the monster in the closet in Vancouver. Where even if it exists, the idea of it is more potent and pervasive than the actual thing. That, combined with the fact that the market has become so focused on investment and speculation has made people just stop to wait and see what's going to happen.BC started levying a 15% surcharge on foreign sales between last August and this August
The complexities in foreign real estate sales can't be overstated. Buddy of mine ended up buying a $525k condo in Long Beach because anything under $500k was being purchased by foreign REITS with cash. However, over $500k and suddenly it's actual citizens. That's entirely due to some US investment law about foreign holdings, or at least that's what the real estate agents tell you. It's one of my biggest hesitations about the California market: the whole thing is outsized and ridiculous because of Prop 13, and any modifications of Prop 13 are going to queer shit up something fierce. Of course, everyone believes that Prop 13 is the 3rd rail of california politics but the sales tax here is more than it is in Seattle and Washington's income tax is nil and the roads are better, the schools are better, the libraries are better, the cops are better... Never fuck with the government.
That's a nice house. I'm not so sure about $1.8M, but it's nice. I like that shed/cottage thing. It surprises me that foreign buyers are only 5% of the market. I suppose if they own only 5% of the homes, then they could have had a much larger effect if that happened over several years. Maybe you'll get lucky and be able to take advantage of a sharp drop. Our house has more than recovered from where it was before the last crash, and yet we had a hard time getting it to appraise anywhere close to the short sale price when we bought it in 2009.
That 5% is just an estimate. My own feeling is that it is much higher, say 25%. The thing about a house like that is that it would have gone for $800K in 2010. Same for the house I live in now. My landlord bought it in 2010 for $800K and now it's at $1.7M. That's just gross.