In the past several months we have dedicated numerous articles to demonstrate the sheer lunacy of the Vancouver real estate market with isolated cases in which Vancouver houses, whether abandoned or in phenomenal shape, would sell for millions of dollars above asking just because Chinese buyers would pay any price in their rush evade capital controls and launder cash in northeast Canadian real estate. Perhaps the most egregious example took place two weeks ago when we wrote "Valued At $16 It Sold For $68 Million "In 7200 Seconds" - The Inside Story Of Vancouver's Wildest Property Deal."
Today we step back from the micro to look at the bigger Vancouver real estate picture. What we find is that, as CBC writes, "The insanity, it seems, is not over."
One would think that after the Canada Mortgage and Housing Corporation officially admitted - with about a 3 year lag - that there is a bubble, having written in its latest quarterly report that there is "strong evidence of overvaluation" in Vancouver, that at least some of the air in the Vancouver housing bubble would be let loose.
Instead what we find is that despite ongoing warnings from the CMHC that the Vancouver housing prices are overvalued and have outpaced the economic fundamentals in the city, they keep climbing.
As CBC reports, in the past year, the benchmark price for a detached home in the region — not just the City of Vancouver itself — has climbed 30.1%, to $1.4-million, according to new numbers from the Real Estate Board of Greater Vancouver. The "benchmark" price is a measure used by the board to describe what it calls a "typical property" in the market, taking into account bedrooms, lot size, and other factors, and is not an average or median price.
Putting that in context, the median family income in the Vancouver metropolitan area is $73,390, lower than the Canadian average, according to the latest census numbers available. And yet, the highest benchmark price for a detached home is still Vancouver's west side, at $3.2-million, which is up 172 per cent over ten years, and 28.4% in the past year.
And now that sellers have found wiling Chinese "dumb money" buyers to offload their real estate, they are moving out. As a result the largest increases in house prices in the past year are actually outside Vancouver. Per CBC:
- Tsawwassen up 41 per cent to $1.16-million.
- Richmond up 36.5 per cent to $1.5-million.
- Ladner up 35 per cent to $971,500.
- Apartment and townhouse listings went up 20.6 and 22.1 per cent, respectively, in the past year in Greater Vancouver.
The price increases are, not surprisingly, driven by a strong demand with not much supply. There was a slight increase in residential listings last month, but not enough to keep up, said Greater Vancouver Real Estate Board president Dan Morrison in a release.
"While we're seeing more homes listed for sale in recent months, supply is still chasing this unprecedented surge of demand in our marketplace," he said.
Thank China. In April 2016, sales of all properties (not just detached homes) in Metro Vancouver were 41.7% above the 10-year sales average for the month.
Meanwhile, the total number of properties currently listed in Metro Vancouver is down 38.3% from last year for the simple reason that once Chinese money launderers have parked their cash offshore, they have no further interest in flipping. After all, Canadian real estate is now the "New" Swiss bank account.
It also means the sales-to-active listings ratio, a measure analysts use take the temperature of a market, was 63% in April 2016, the sign of a seller's market. Home prices tend to experience upward pressure when that ratio is just 20 or 22 per cent, according to the board.
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Finally, for those who enjoy charts, here is a comparison of average home sale prices in the US vs Canada...
And a chart looking at just Vancouver vs Toronto home price growth. What it shows is that BMO - whose chart this is - really needs a bigger chart, as the growth in Vancouver home prices is now quite literally "off the chart."