Since it opened in December, the Twitter account Vancouver Real Estate Flip Flops has been tweeting about the rapidly falling prices of residential property in the city.
“It took 10 months and $1.73m in price cuts, but it’s sold!” read one post about a property on the city’s high-end West Side. “Sold for $2.1m below initial ask price from 6 months ago,” came another tweet this month about a West Side detached home.
“In the end we may well find ourselves back at 2009 pricing for detached homes on the West Side,” says the account’s owner, who does not want to be named but claims to have no vested interests in the market. “When will we get there? That I don’t know.”
Just a few years ago, it seemed the sky was the limit for Vancouver property values. By May 2017, the average sale price of a detached home in Greater Vancouver — prized for its beaches, mountain views and cosmopolitan downtown (and a park bigger than London’s Hampstead Heath or Manhattan’s Central Park) — hit a record C$1.83m (US$1.36m) after a decade of growth.
By February 2019, the average sales price for detached homes in Greater Vancouver stood at C$1.47m; in the city’s West Side, considered one of the area’s most desirable markets, prices have fallen as much as 30 per cent since the 2017 highs, says Tom Gradecak of Westside Realty.
Also in February, former IT worker Ernest put his five-bedroom West Vancouver home on the market for just under C$3m, hoping for a quick sale so he could buy a home with an additional bedroom for his mother. “At first, my realtor and I were very confident,” says Ernest, who did not want to give his family name. But the home failed to sell and he is now preparing to think again. “I don’t think you can sell in this market,” he says. “Everyone is thinking that it is going down even more so there are more sellers than buyers. I think I need to put my plans on hold.”
Ernest is not alone. “Two years ago, we would begin by booking an appointment with the seller to discuss all the competing offers that would inevitably pour in,” says Gradecak. “Now, we have to start by having a long conversation about prices.”
Dane Eitel, founder of property analytics company Eitel Insights, says residential prices began to fall in 2017 because the Vancouver market for detached homes had come to the end of its cycle. But a slew of government measures is likely to have precipitated the downturn. Changes to the federal government’s rules on mortgage borrowing have affected confidence, says Michael Ferreira of Urban Analytics. The changes — known as the 2018 stress tests — reduced potential buyers’ purchasing power by 20 per cent, he says.
“If you were an entry-level buyer looking at a town home for C$780,000, you suddenly found yourself looking in the C$650,000 range,” he says. “It created a real ripple effect across the market, and it was a shot across the bows.”
Thursday, 8 February, 2018
One concern provincial and municipal authorities had while prices were rising was the number of Chinese buyers: their appetite for Vancouver property leading up to 2016 was behind house-price inflation, some economists say, helping set apart values from locals’ capacity to buy.
The response was a foreign buyers’ tax, which started at 15 per cent of the purchase price and quickly rose to 20 per cent. After that, the government included a “vacancy tax”, which punished homeowners who left properties empty. A separate tax pushed up the cost of owning luxury properties. And the top band of local transfer taxes, levied on all property sales in the province, increased from 3 per cent to 5 per cent on values above C$3m.
Tot all that up, and Gradecak of Westside Realty has no doubt about the causes of today’s falling market. “It is a government-induced downturn,” he says. “The economy is still strong, people are still moving to Vancouver, there is still demand for property and yet home prices are falling.”
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According to the Real Estate Board of Greater Vancouver, there were 144 detached home sales in the first three months of 2019 compared with 221 in 2017 — and 579 in 2016. In West Vancouver, the average sales price between January and March this year was C$3.1m compared with C$3.9m in the same period of 2016.
In a market that has swung heavily in buyers’ favour, all of that spells bargains — at least relative to prices of a couple of years ago. Gradecak is listing a two-bedroom, 1,200 sq ft apartment in Kerrisdale for C$989,000. In the same neighbourhood, Gradecak is listing a three-bedroom home with great views of the Gulf Islands for C$5.995m.
With the Chinese government now making it harder for nationals to take money out of the country, and with no sign of a U-turn on tax policy in Canada, nobody is predicting an end to the falling prices. As Eitel puts it: “We are still trying to find out where the bottom is.”
Three-bedroom house in Kerrisdale, C$5.995m © Barn Owl Photography
Foreigners must now pay a one-off tax equivalent to 20 per cent of the purchase priceMore expensive homes in Vancouver are exposed to a slew of recent property taxesVancouver’s climate is milder than other Canadian cities, with average annual snowfall of 17.5 inches per year compared with more than 82 inches for Montreal and nearly 50 for Toronto
What you can buy for . . .
C$1.5m A two-bedroom condo on the city’s west side
$2.5m A three-bedroom detached home in West Point Grey
$5m A 5,000 sq ft, six-bedroom, five-bathroom family home in Vancouver’s Quilchena neighbourhood
More homes at propertylistings.ft.com
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