October '22 Real Estate in Metro Vancouver & Economist viewpoints
The market has plateaued? Also, one of the best economic summaries I have heard
Watch for: HPI Price Index changes, Active Listings, Sales, Condo Report, Townhouse Report, Detached Report.
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Metro Vancouver
Real Estate Economic Outlook
The market has plateaued.
The not so Short, yet Easy summary
Some trends and details that caught my eye.
All 2021 sales volumes were at a RECORD high. Any difference in sales volume year-over-year is comparing to a record, unique year (35-44% decrease in sales).
2021 the general economy and real estate picked up unmet demand from the pandemic shock in 2020. The GDP increases experienced in 2021 represents nearly 2x of activity*. The kneejerk level of consumption blew past product and service delivery capacity and exhausted nearly all supply chains.
Monthly real estate sales volumes in Metro Vancouver have been consistent decreases month-to-month from ’01 over the last 5 months. This consistency sets the tone of a plateau; an indicator that we have bottomed in regards to sales and price decreases. This also gives some predictability moving forward.
At the end of the day, this is the 1st major interest raise that I have seen since 2008 and am impressed of the magnitude of an influencer of the real estate market this is. Let’s remember that the fixed 5-year rate in 2005-2007 was between 6 - 7.2%.
We are seeing a return to normal. This should not be surprising, nor it is the end of economic celebrity. The current 5-year fixed rate (at publishing time of this Realtor’s thoughts) is 5.54% with the expectation that after one more small interest rate increase, the interest rate rise will plateau. Take a look here at historical interest rates.
NOW... WHAT AN ECONOMIC EXPERT HAS TO SAY
I had the pleasure, yes pleasure, to be invited to listen in on a National call from CIBC's great economic wizard, Benjamin Tal (Managing Director & Deputy Chief Economist - CIBC Capital Markets Canada) speaking to impacts from the world of finance and the real estate industry across Canada. I enjoyed Ben's little to no hesitation with any question :)
Shaun's Notes:
Largest markets are correcting the fastest
Next 5 years?
No panic selling, limiting the decline as not over supplying the market.
Stabilization of pricing by the spring
Limited new construction & pre-sale. No starts = lack of supply. More pressure on the necessity for rental purpose to DRIVE new construction.
Not like 2008 in China.
Real estate developers; its harder to get financing from gov’t.
No cuts on rates soon. Want to make sure recessionary scares are OVER.
5-year rate will go down in summer
Variable rates in the 4.25 rate
2% inflation rate was a historical norm - Why? Currently there is new forces pushing inflationary rates. If you change direction of 2% to 3%, BOC loses credibility and opens if they say yes to 3% they could say yes to 4%, 5%.
Is stress test still needed? Must be relative to where market rates are. (Not necessary SC)
Low rise will underperform in next 6 months. High rise is more affordable final user product.
House prices have rose 46% in 2 years. BOC wants to slow the economy, inflation and housing prices.
Most significant change in housing supply is encouraging; most in history.
Immigration; composition of new immigrants 2021; 70% already in Canada (this stat surprised me) students conversion of temporary workers. 70% came from Canada. Population growth is fastest in Canada from OECD democracies.
1M vacancies of jobs atm. Ability to impact the labour market is limited due to the vacancies. Limited change in the next 6 months.
People losing their houses? Covid cohert bought in 2020/2021 in 2025 will experience a price shock. (You may be locked in now, but start to increase your payments NOW in preparation for expiration of your 5-year term and higher rates).
Not a delinquency story. It’s a consumer story. Less $$ to fun, play, food and more to housing expenses.
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