As the summer weather continues to heat up in Vancouver, homebuyers and sellers became less active in the Greater Vancouver real estate market.
Sales were down 24.1% in July 2010 from the previous month and down 45.2% from the same month last year. However, July 2009 was the highest selling July ever recorded by the Real Estate Board of Greater Vancouver, therefore any comparisons to that month’s sales should be viewed with moderation.
A number of combined external factors have also come into play this year. These have had a direct impact on the Greater Vancouver housing market starting in the 2nd quarter of 2010, which the market did not have to contend with in 2009.
In their August 4, 2010 news release, the Real Estate Board of Greater Vancouver stated that:
Home sales activity in Greater Vancouver was quieter last month than most Julys over the past decade, with residential sales, prices, and the number of homes listed for sale trending downward in recent months.
The Real Estate Board of Greater Vancouver (REBGV) reports that the number of residential property sales in Greater Vancouver totaled 2,255 in July 2010. This represents a 45.2 per cent decline from the 4,114 sales in July 2009, the highest selling July ever recorded, and a 24.1 per cent decline compared to June 2010.
Looking back further, last month’s residential sales represent a 3.7 per cent increase over the 2,174 residential sales in July 2008, a 41.8 per cent decline compared to July 2007’s 3,873 sales, and a 17.5 per cent decline compared to July 2006’s 2,732 sales.
“With the pace of home sales and listings easing off in our market, we’ve begun to see a levelling of home prices from the record highs seen in the spring, creating greater affordability,” Jake Moldowan, REBGV president said. “Activity in today’s marketplace is clearly trending in favour of buyers.”
The number of properties listed for sale on the market has been trending downward since spring, with 4,138 new listings in July compared to April’s peak of 7,648. New listings for detached, attached and apartment properties in Greater Vancouver on the Multiple Listing Service® (MLS®) declined 17.9 per cent in July 2010 compared to July 2009, when 5,041 properties were listed for sale.
At 16,431, the total number of property listings on the MLS® in July declined 6.5 per cent compared to last month and increased 33 per cent compared to July 2009.
“It’s currently taking home sellers who work with a REALTOR®, on average, 45 days to sell their property, which is a historically healthy timeframe for people on both sides of a transaction,” Moldowan said.
Since spring, housing prices have decreased 2.8 per cent compared to the all-time high reached in April when the residential benchmark price was $593,419. Over the last 12 months, the MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 9.1 per cent to $577,074 in July 2010 from $528,821 in July 2009.
Sales of detached properties in July 2010 reached 908, a decrease of 43.7 per cent from the 1,614 detached sales recorded in July 2009 and a 9.8 per cent increase from the 827 units sold in July 2008. The benchmark price for detached properties increased 11.5 per cent from July 2009 to $793,193.
Sales of apartment properties reached 979 in July 2010, a decline of 42.7 per cent compared to the 1,708 sales in July 2009 and an increase of 1.3 per cent compared to the 966 sales in July 2008.The benchmark price of an apartment property increased 6.2 per cent from July 2009 to $387,879.
Attached property sales in July 2010 totalled 368, a decline of 53.5 per cent compared to the 792 sales in July 2009 and a 3.4 per cent decline from the 381 attached properties sold in July 2008. The benchmark price of an attached unit increased 8.6 per cent between July 2009 and 2010 to $490,995.
The Canadian real estate market was hitting on all cylinders in the early part of 2010. Canada’s economy charged ahead at a pace not seen since 1999 by recording an impressive 6.1% GDP growth in the first quarter of 2010 and the housing market had a big role to play in that.
On April 19, 2010, the Canadian Department of Finance introduced what they described as “measured steps to support the long term stability of Canada’s housing market.” These steps effectively changed the underwriting guidelines for mortgages insured by CMHC, the Canadian Mortgage and Housing Corporation.
These rules made it much more restrictive and harder for many Canadian’s to buy into the housing market. In some high priced areas such as Vancouver and Toronto, it effectively knocked them out of the market entirely.
In our May 18, 2010 story “Vancouver Housing Market Records 12% Sales Increase in April,” we wrote:
Although, new Canadian mortgage rules that were introduced on April 19, 2010 may have a negative impact on the high flying sales figures in Greater Vancouver, I anticipate that the current trends will carry over into May 2010 as buyers attempt to beat the impending 12% HST tax arriving in British Columbia on July 1, 2010.
The implementation of the New 12% HST tax in British Columbia on July 1, 2010 also colluded to distort the BC real estate market leading up to the date of its introduction. Many sales were accelerated to avoid the new tax, resulting in negative consequences for July sales across BC.
July 1, 2010 was the start of the first month with the new 12% HST tax in place and it is only 2 months and 12 days since the April 19, 2010 introduction of Canada’s new mortgage rules.
In our July 9, 2010 story “Vancouver New Home Prices Almost Double National Average in May 2010,” we had the following excerpt for CMHC:
The provincial sales tax on building materials in Ontario and in British Columbia is embedded in the contractor’s selling prices of new houses. With the introduction of the HST in these two provinces, this provincial sales tax will be eliminated and replaced by the HST. As value added taxes are conceptually excluded from the index, this change may cause negative monthly variations in the index for some metropolitan regions in Ontario and British Columbia during the implementation period of the tax.
The CMHC recognized that the New 12% HST tax would have some negative monthly variations in its index after its implementation on July 1, 2010 the same can also be said for any home sales index or figures in BC.
As for the status of the Greater Vancouver real estate market in July 2010, one figure that has not been widely reported can best be used to put that into perspective.
The total year-to-date sales for the Greater Vancouver market including detached, attached, and apartment properties from January 2010 to July 2010 saw 19,428 sales, a slight increase over the 19,367 sales that occurred over the same period in 2009.
According to the year to date figures, the Greater Vancouver real estate market can be viewed as being on a similar overall pace to 2009. The current market fluctuations are a natural response to changing market conditions.
Vancouver mortgage broker, Mark Fidgett said, “Simply put, buyers have retreated and those that remain lack confidence. Also playing a role is the Bank of Canada 25 basis point rate increase on June 1, 2010, the first increase since July 10, 2007 followed by a further 25 basis point increase on July 20, 2010.”
“The stats do not tell the whole story,” said Vancouver mortgage broker Robert Mogensen. “The sales are down, that is true, but the overheated market in the last few years has not been a normal one. There are still sales occurring. People are buying, selling and negotiating the best deals from both sides of the process.”
“Anecdotally there are still some areas that are hot and people are willing to do what it takes to get into certain areas,” added Mogensen. “I had a couple last week that where out bid on a single family home near Main and 17th Avenue, even though their bid was $100,000 over asking. My gut feel is that once we are out of the dog days of summer, September will bring back the buyers and things will definitely pick up.”
