Emma Van de Wetering : Royal LePage Sterling Realty : Archived blog posts for : September 2016

Opinion: Why Now is a Great time to Invest in a Condo

Posted on September 27, 2016 by Emma Van de Wetering

Sitting on the sidelines while you wait to see what the market will do? No, argues Frank O'Brien, this is the time to summon your inner Warren Buffett

Frank O'BrienREW.ca

September 27, 2016

Metro Vancouver condominium sales are falling. Price increases have slowed, even stopped, and it is suspected that scores of pre-sale condominium deals may collapse.

Some of the recent turmoil relates to the 15 per cent tax on foreign buyers that was rushed into Metro Vancouver on August 2, some to the seasonal summer doldrums. But the sales slowdown began earlier. Condo apartment sales in East Vancouver – one of the best investment markets – were down 20 per cent in May from the same month a year earlier and have been tracking lower, year-over-year, ever since.

Get in on the Action

For investors and even first-time buyers, this is the break you have been waiting for.

Tina Mak, a Vancouver real estate agent and founder of the Vancouver chapter of the Asian Real Estate Association of America, believes now is a great time to buy a home, including a condominium. Mak urges buyers to remember the words of legendary investor Warren Buffett: “Be fearful when others are greedy and greedy when others are fearful.”

Over the next few weeks, we suspect that media reports on the housing market will be mostly fearful. It will take a while for the jolt of the foreign buyer tax to work through the system and, in the meanwhile, condominium sales and prices will be slower and lower.

Yet the fundamentals for condominium investors remain rock solid. Mortgage rates are still at historic lows, there is a huge demand for rental condominiums, in-migration to the region is strong and there are more than 2,000 resale condominiums on the Metro Vancouver market. Best of all for investors, vendors spooked by the sudden sales slide are more open to price negotiation than at any time in the past 18 months.

It’s All Part of the Cycle

Be calm. Real estate cycles normally roll over seven-year periods. In 2009, when the last downturn hit, listings spiked and the average price of a condominium sold through the Real Estate Board of Greater Vancouver slumped below $260,000.

Today the average condo price is north of $510,000.

Recently, REW.ca listed three dozen one-bedroom condominiums in Metro Vancouver priced at $350,000 or less, including 16 priced below $300,000. At the same time, nearly 700 condos were listed on Metro MLS at $500,000 or less. For first-time buyers who need mortgage insurance, this can often be purchased with just a five per cent down payment.

We fully expect the condominium market to bounce back from the current slump, but right now a window of opportunity is wide open for savvy condominium buyers.

Key Takeaways

Condo sales are down significantly and there’s lots of resale product available.
This represents a great opportunity for investors and first-time buyers.
Mortgage rates remain low.
Demand for rental condos is high.
Our population continues to rise.
Sellers are open to negotiation.

Frank O'Brien

Frank O'Brien is the editor of Western Canada's biggest commercial real estate newspaper, Western Investor, as well as a contributing editor at West Coast Condominium, real estate contributor to Business in Vancouver and a regular media commentator on real estate investment.

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B.C. economist says price of Metro Vancouver houses will keep climbing

Posted on September 26, 2016 by Emma Van de Wetering

VICTORIA — Metro Vancouver house prices will more than double over the next 25 years, as supply continues to be tight and more people move to the region, a senior B.C. economist predicts.

Helmut Pastrick, chief economist with Central 1 Credit Union, said Metro’s housing market has taken a hit with the recent 15-per-cent foreign buyers’ tax, but demand for property will likely rise in the long term because there is little room to expand in geographically constrained Metro and a million more people are expected to move here by 2041.

This demand will likely worsen affordability and force more young people to rent for longer, he added, as incomes won’t rise at the same pace. Metro Vancouver home prices have ballooned in recent years: Just recently, a “student” flipped a Point Grey property for a $1.6-million profit within a year.

“We just have a shortage of land,” Pastrick told delegates at the annual Union of B.C. Municipalities convention Tuesday. “As long as we have ongoing growth, we will see increased demand for housing. I think it will be a national and global development as well.”

Pastrick maintains such cycles aren’t new, noting there have been constant rises and dips in B.C.’s housing market, with a series of recessions since 1957 in which prices dropped between 10 per cent and 35 per cent.

Pastrick said he couldn’t predict when the next recession will strike, but wouldn’t be surprised if, in the meantime, the provincial government considers other measures to cool the market. This could include requiring higher down payments for first-time homebuyers or a gradual increase in interest and mortgage rates.

“This cycle will come to an end, but affordability will worsen,” he said. “Someone once said ‘they don’t make land anymore.’ We will see more renters than we do today, largely because of the unaffordability.”

High house prices are crushing the young demographic’s dreams in this province

Paul Kershaw, associate professor at UBC’s School of Population and Public Health, said interest rates should be increased. They are helping to fuel the sluggish economy, he said, but the availability of cheap cash is driving up housing prices across B.C.

He and UBC’s Thomas Davidoff have a more controversial suggestion to cool the market: increase taxes for older homeowners — most likely seniors — who have paid off their homes and accumulated wealth in those properties.

The idea concerns North Saanich Mayor Alice Finall, who said many of her residents are already “house poor” and “a higher tax may make it impossible for them to stay in their home.”

Kershaw acknowledged such a tax may be unpopular, but said people over 55 can defer taxes until they sell.

Meanwhile, it would take the average young person in Metro Vancouver 15 years to save enough for a down payment, and that would likely only be enough for a condo.

“High house prices are crushing the young demographic’s dreams in this province,” he said.

He also suggested the province should cut income taxes, provide more rental accommodation and reduce the cost of child care, parental leave and transit so that young families aren’t having to take out a second mortgage to care for their children.

Davidoff, meanwhile, said the province should go beyond Vancouver’s vacancy tax and insist that all B.C. homes that are not used as a primary residence face a higher tax. Politicians also have to get tougher with zoning practices, he added noting that they hold public hearings for one-off rezonings and end up bowing to residents who want to keep luxury single-family homes in places like Vancouver’s west side, which results in renovictions in other places where there is weaker opposition, such as Vancouver’s east side.

Davidoff added the province should also dictate to municipalities how many apartments, townhouses and single-family houses they need, so municipalities can set “targets” for themselves, as well as tell developers what to build.

“Over time, this challenge isn’t going to go away, it’s going to be exacerbated.”

ksinoski@postmedia.com

twitter.com/ksinoski

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