September 2016 Update
The detached housing market continues to be slower than the attached housing market. Sales of detached homes in September represented 29% of all sales for all housing types compared to 38% in September 2015 and to 42% at the peak of our market last February / March 2016.
What the 15% foreign buyer tax has done and will do is accelerate a market normalization. Each week there seems to be a new government measure to ease pressure on the real estate market followed by a media feeding frenzy. Our real estate markets were normalizing even before the 15% Foreign Buyer tax came into effect.
New mortgage qualification rules introduced by Ottawa this week mean that buyers who take out an insured mortgage (a downpayment of 20% or less) will now have to qualify based on the “Posted 5 YR Qualifying Rate” (presently 4.64%) instead of the actual mortgage lending rate.
Vacancy Rates and Short Term Rentals
This summer, New York City passed a bylaw completely banning Airbnb and other short term rentals. San Francisco has just imposed strict new rules and fines on owners who engage in Airbnb and other short term rentals. City of Vancouver will create an audit task force which will allow the City to declare victories against home owners who allow the property to sit empty or who engage in short term rentals of 30 days or less.
We still enjoy the strongest performing economy in Canada, with a diversified base of economic activity – film production, tourism, strong retail sales, a strong high tech sector, etc. The homeownership rate continues to climb in Metro Vancouver, and population growth is consistent. New home permit applications are at record levels right now and vacancy rates are at record low levels. By 2041, only 10% of housing stock in Vancouver will be single detached homes compared to 28% in 2011.
Our market has been in overdrive for 2 years with all types of buyers being active in all market segments and all housing types. What to expect now? Fewer buyers at the high end of the market and now new price sensitivity at the low end of the market as a result of Ottawa’s changes this week. Once the high end of our market; (about $4 million and up) corrects by about 15% to 20%, some foreign buyers, now on the sidelines, will come back.
Government is a Big Part of the Cost
New real estate developments and master planned communities will continue to be green, green and more green, making them very very expensive. The total municipal, provincial and federal government tax haul and permit fees on all new condo developments represents about 30% of the cost of a typical $500,000 condo. Vancouver has 103 different permits, taxes and fees that a developer must pay, ensuring that new housing into the future will be very very expensive.