Vancouver – Who Is Buying your Homes?

Who’s buying?

Each month the Greater Vancouver Real Estate Board asks Vancouver Realtors® to respond to a survey. The survey is restricted to members who have made at least one sale in the preceding 30-day period.

Vancouver Realtors® 5 month Report for 2011

* Courtesy REBGV

About Larry Yatkowsky

Larry is a recognized real estate expert. A veteran professional, his experienced counsel leads Vancouverites in his west side community to place their trust in a man passionate about his work. Uncompromising ethics bring a balanced approach to realizing your real estate dreams.

When Life Moves You - contact Larry:

*Disclaimer: Statistics Courtesy REBGV. While believed to be accurate they are not guaranteed.
**Numbers provided may vary as they are dynamically posted by the REBGV.

Reader Comments:

jesse Says:
June 16th, 2011 at 9:33 pm

Wicked awesome. Thanks Larry.

specialfx3000 Says:
June 17th, 2011 at 7:43 am

As always, thanks for providing excellent unbiased information Larry.

If this market turns, it might be good business for you.

At that time, bears will turn bull and there will not be many realtors that will get their business (you among the exception)

specialfx3000 Says:
June 17th, 2011 at 7:48 am

I’d be very interested to know who many of the surveys returned are from Chinese realtors.

Based on the percentages, my guess is that many foreign purchases handled by Chinese realtors did not make the survey stats.

June 17th, 2011 at 8:13 am

@special
you may want to look at Landcorp’s latest work piece for some indication of off shore buyers. Admittedly it’s all pretty nebulous but in it’s defense it is better than no information at all.

As to how many surveys were completed by Chinese agents? Though I have nothing to back up this statement other than ‘gut feeling’, I think it would be quite fair to say that it was an equal level of participation.

L8erDude Says:
June 17th, 2011 at 9:01 am

wow.
If you’re a real estate bear these stats refute most of the negative theories you’ve always held about this market. Not nearly as much high ratio as bears assume. Not nearly as much hot asian money, and most detached are move up buyers – likely families
Thanks for posting Larry

June 17th, 2011 at 10:14 am

@l8erdude

if you are a real estate bear… never thought of them as theories just a back porch side door opinion. 🙂

Jay Says:
June 17th, 2011 at 10:30 am

Very interesting survey.

Could you link to the Landcorp report you mentioned about off shore buyers?

Thanks.

jesse Says:
June 17th, 2011 at 10:42 am

” refute most of the negative theories”

My theory suggests a 30% drop in prices will be like water off a duck’s back, given the equity most families seem to have.

Finding data and analysis explaining why prices are high is fun. But it misses the point — prices are too high. Who gives a fig why.

specialfx3000 Says:
June 17th, 2011 at 12:38 pm

Dude said “Not nearly as much high ratio as bears assume.”

I thought Realtors and bulls are freaking locals out to about the Chinese buying everything. Act now before you get priced out forever.

So both Bears and Bulls are wrong here?

June 17th, 2011 at 12:54 pm
L8erDude Says:
June 17th, 2011 at 5:21 pm

@jesse
30% off is yet another flawed theory. Try finding an owner who’ll accept what will amount to about 300K+ in losses when they sell. Good luck to ya.

L8erDude Says:
June 17th, 2011 at 5:24 pm

@ specialfx

I happen to agree with you. The math is suspect. If 80% of west side homes are purchased by overseas buyers, wouldn’t that amount to about 40% of all purchases, not 3%. It may be realtor spin but it’s probably more distressing if you’re a bear…local buyers CAN afford current record high prices – and they aren’t going to take their ball and go home.

604serf Says:
June 17th, 2011 at 6:23 pm

@L8erDude

Noone knows how this will turn out.

But let’s be clear…local buyers PAYING these prices does not equate to local buyers being able to AFFORD these prices.

Affording these prices mean you have sufficient dollars to save for retirement, invest, enjoy life AND weather an increase in rates and downturn in the economy…

It’s not ONLY about completing the RE transaction that one time…

Ben Says:
June 17th, 2011 at 7:09 pm

Great stuff, Larry. Thanks for sharing.

@L8erDude….

Markets don’t work like that. Fundamentals do matter….

http://www.theeconomicanalyst.com/content/rough-day-vancouver-boston-bruins-mark-carney-and-td-all-rain-parade

bbcoq Says:
June 18th, 2011 at 1:58 am

Surprised me Larry but what do you make of the drop in 1st time buyers-is that not a typical negative indicator? What do you make of the drop in condo sales? Drop in the far suburbs of Abbotsford, Mission or Maple Ridge? Or am I looking for things that support my own belief?

L8erDude Says:
June 18th, 2011 at 8:22 am

@604serf

The actual buying is proof of affording. Further proof is that 80%+ are not high ratio mortgages. I don’t know how you can paint this with the bear brush.
As far as saving for retirement, enjoying life, etc…you’re making an assumption that buyers are unable to – and this is most likely wrong too.

June 18th, 2011 at 8:24 am

@bbcoq
IF the first time buyers with whom I am working are representative of the general group, price is certainly a major factor. I don’t work much up valley but relative speculation would suggest a similar response.

“Looking for things to support your own belief” – of course! We all have opinions and that is a good thing! 🙂

danny Says:
June 18th, 2011 at 11:06 am

I already feel sorry for @L8erDude. Pigs get slaughtered. Foreclosure works differently in Canada dude. You can’t walk away like the Americans. Happy retirement to ya!

604serf Says:
June 19th, 2011 at 12:01 am

“The actual buying is proof of affording”

I like that. So it’s ok for you to assume that they are saving for retirement, etc. But it’s NOT ok for me to assume that they aren’t.

This is awesome, I’m going to go buy a Bentley and Ferrari tomorrow; as it’s clear that since I can pay for the cost it means I can afford them…

June 19th, 2011 at 8:25 am

@danny
Yes default rules on mortgages are different than in the US.
Can your tell us how they differ generally and how they vary by province?
Last, please ease up on the debasing vitriol.

L8erDude Says:
June 19th, 2011 at 9:19 am

2604serf

“So it’s ok for you to assume that they are saving for retirement, etc. But it’s NOT ok for me to assume that they aren’t”.

I’m not making any assumptions, you are. You assume that locals cannot afford (by your definition). So where is the proof of this? Or is it just bear smear?

June 19th, 2011 at 11:27 am

@l8erdude, @ 604serf

so folks here’s a question for you. In either case do you think it is just a demand of life dictating that first you need a place to live and second you hope to hell you have enough left over to build a ‘retirement’ plan?
The assumption being made is that there is only so many $$$ in a household budget and as humans we tend to put out the immediate fire first (owning a home) and worry about the secondary ‘creeping’ fire (retirement) later.
What are your thoughts?

L8erDude Says:
June 19th, 2011 at 12:57 pm

@ Larry,

The whole retirement income hysteria is way overblown. When you have a free and clear mortgage in retirement, and you’ve paid into CPP or private pension, then there’s little to worry about.
Banks, advisors, etc. telling folks they need 50K/year in income when mortgage if free and clear is just spin to get folks to invest more so institutions can use your money to make more of their own.
If you’re self employed and not planning for some future income then there’s a problem. Not many of those around though

Rob Says:
June 19th, 2011 at 8:53 pm

@L8erDude
Really, how much do you think CPP pays you? Also what % of people have pensions. I think you are a bit misguided on your retirement income. Don’t forget inflation. As my experience with my parents retirement income suggests 50k/year is about right.

604serf Says:
June 19th, 2011 at 9:16 pm

RE: Retirement

I wouldn’t paint everyone with the same brush, as everyone’s situation is very different. As always, the population is a mix of different financial situations for sure.

I’m sure there are a large portion of people buying houses right now that are still saving for retirement, enjoying life and keeping a decently small mortgage.

I’m also sure there’s a segment of the population that isn’t thinking so far ahead. There is definitely some who think they “have to buy” because:

a) They’re getting married soon
b) They’re having a child soon, etc. etc.

It’s only natural to focus on the more immediate things first. I actually agree with L8erDude that having a fully paid off house, etc. puts one in a great situation. I would recommend not relying solely on CPP though. Having one’s own little nest egg can be reassuring.

My issue is NOT with people who can afford the homes, i.e the ones where their wealth isn’t overly concentrated in their home, the ones NOT paying 70% of their income into housing costs.

The issue I have is with the people taking large mortgages (IMHO large would be $500K+) that don’t have much money left over for anything else. This may not be everyone, but I wouldn’t be so naive to think that this segment does not exist either.

I think owning a home is great idea, not just financially but for other personal aspects as well. But at what price?

This just goes to show, a bear and bull can look at the same data, comments, etc. and take two completely different views of it.

L8erDude appears to be a bull, which is great as RE values have exploded over the last several years. Many people, including myself, have profited from it.

However, I tend to think that having all “good news” actually makes it a negative environment for bulls. If i was looking to put money into a long term investment such as RE, I’d want LESS demand, LESS scary social pressure, LESS good news, etc. That way I’d pay lower prices and make a higher return.

All this talk about HAM, strong demand, etc. If I was a RE bull and looking to get in, I’d hate it!

Conversely, as a Bear, it makes me happy that people are allocating their capital now…getting themselves in the mkt. Shoot their bullets now…

L8erDude Says:
June 20th, 2011 at 9:48 am

@604serf

“the ones NOT paying 70% of their income into housing costs”

no-one is paying 70% of their income on housing. There are strict guidelines on how much a buyer can borrow – usually 32-34% of gross income.
You’re confusing the stat that’s often published…70% avg income into avg housing costs. Obviously it’s a crude stat that you can’t easily extrapolate from.

L8erDude Says:
June 20th, 2011 at 9:51 am

@Rob

I keep hearing how heavy we are in public service here in BC. If that is the case then we are also heavily pensioned. Ever hear of the municipal pension plan?
My parent’s are running a SFH on their retirement income of 35K/year. And if they move to a condo/townhouse they’ll have even more disposable. This seems about right to me.

shriller Says:
June 22nd, 2011 at 9:37 am

I find this thread quite interesting. We may all have `theories’ about where prices are going to go but there seem to be two flawed arguments here.
(1) 60 percent of the respondents are trading in a given price distribution and so are trading on relative prices, not absolute price levels. 40 percent are trading on levels (and arguably `setting’ them). Relative price traders do accept 30 per cent declines in price levels since what they care about is the relative quality of the asset. This is why housing prices can decline and these people still sell (as history abundantly shows).
(2) A financial institution has no incentive to ensure that an insured mortgage is affordable. Or if they can sell these mortgages in a pool like the NHA-MBS. They frankly don’t care that someone is 95 percent likely to default. By extension, purchase prices don’t reflect affordability. The obvious example is in the US. And yes it is different here. It’s just not objectively better. And if you think it is, you should read the prospectus on (say) the 965 pooled mortgage backed securities issued via CMHC. We, the Cdn people, turned housing debt into gov’t debt.

L8erDude Says:
June 22nd, 2011 at 10:00 am

@ shriller
I have no idea what you’re talking about in (1).
Regarding (2) I can tell you for certain that banks are vigilant in making sure the property you purchase is affordable. The common rule is that you cannot buy a home that exceeds 32% of your GDS (gross debt servicing). Also, your TDS (total debt servicing) cannot be more than 40% of your gross income. If you’d every applied for a mortgage you’d know this. I’ve been denied a mortgage before and had to pay off car loan, visa etc. to get myself under 40% TDS in order to take out a mortgage. Educate yourself.

JRoss Says:
June 22nd, 2011 at 11:30 am

It is more than a little ironic that you open with ‘I have no idea what you are talking about’ and then close with ‘educate yourself’.

I understood what the poster wrote and agree on both counts.

Perhaps you should take your own advice.

shriller Says:
June 22nd, 2011 at 11:43 am

L8erdude,

Really, an ad hominen attack is your response? I have educated myself and I continue to do so. If you don’t understand my point that’s exactly what it means: you don’t understand it. Although you didn’t ask politely, let me try again. If you have an apple but you want an orange, what matters is the relative price of an apple in terms of an orange. If the apple is worth more than the orange you can `buy’ it. Regardless of the price of the orange in terms of money (which you may or may not have).
I understand GDS and TDS. In fact, I have applied for a mortgage and was offered one. If you think GDS and TDS are measures of affordability for the life of the mortgage, you are wrong. They are the minimum lending standards that allow a loan to be eligible for insurance (or the NHA-MBS). They are NOT the minimum standard of affordability.
Jeesh, did you even read the prospectus? Do you even know what a 965 NHA-MBS bond is?

bbcoq Says:
June 22nd, 2011 at 12:35 pm

Hate to get in the middle of a good donnybrook but: Affordability does not mean affordability later.
The US is riddled with homes and homeowners who are “upside down”-that is oweing more than the home is worth.
Peoples jobs change, thier incomes change, their marriage status changes-plus things like property taxes, utilities and services change-many current homeowners (such as my parents) are eating into the equity of their homes to pay the high property taxes.
Mortgage rates are at histotic lows and all the “experts” predict rates to go higher-ergo monthly obligations to rise.
TDS and GDS only tell the bank you can afford said mortgage at the time of application.

L8erDude Says:
June 22nd, 2011 at 1:09 pm

obviously your definition of affordability differs from the standard practice. Without getting into a “yes it is…no it ain’t” discussion – the adherence to these measures of affordability are what kept our housing from going the way of our neighbours to the south; yet now they don’t define affordability? I only hear this bunk from renters and/or former owners. Sour grapes?

June 22nd, 2011 at 6:29 pm

@l8rdude
who are you talking to?

bbcoq Says:
June 22nd, 2011 at 7:37 pm

@l8erdude
current owner, former lender FYI

vanpro Says:
June 23rd, 2011 at 8:33 am

Good article on myth of Mainland China and Vancouver house prices – even China’s own media dispells this as a myth. Article also refers to recent Colliers report that mentions this “myth”:

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/china-not-driving-vancouver-house-prices/article2072241/

“There seems to be more myths than facts about Mainland Chinese investing,” Colliers president Greg Ashley wrote in the intro.

“This trend is certainly impacting single family housing values in Vancouver-West and Richmond. However, it is not the driving force behind all sales. A number of recent launches reported large numbers of Asian buyers — yet a significant portion of these buyers are actually local residents not foreigners.”

vanpro Says:
June 23rd, 2011 at 9:50 pm

Yet another report claims Mainland China effect on Vancouver prices is small. And, now Rudy Neilson of Landcor reverses his previous theory and agrees that using the “Chinese name” method & where the tax assessments are mailed may not be a good methodolgy and Mainland China effect may actually be small:

http://business.financialpost.com/2011/06/23/data-firm-pinpoints-housing-bubble/

Quotes:

Andrew Ramlo, executive director of The Urban Futures Institute, a Vancouver research firm that worked with Ledcor, says the data proves that influence of foreign investment is not a major factor in most of the Lower Mainland.

His group points out of the 55,512 sales in 2010 only 195 were to people outside of Canada — 0.4% of all sales for the year. Furthermore, he says, foreign investors only own 0.5% of the total housing stock of 774,600 residential properties in the Lower Mainland.

“These data contradict what seems to be largely anecdotal evidence indicating foreign investment is a significant driver to residential price increases in the Lower Mainland,” he said in a report.

“There is only one way to track this and we are as close as anybody is going to get,” said Rudy Nielsen, the president of Landcor, about the use of property assessment to track where buyers are from. It also compared names on sales contracts to names common in the People’s Republic of China, excluding people with Western first names.

Mr. Nielson acknowledged his methodology is not without flaws, given assessment notices do not necessarily have to be sent to a person’s permanent address and could be forwarded to a friend, property manager or lawyer located in B.C.

“There is a lot of hype and it is hard to tell for sure what the impact of the Chinese buyers has been. He doesn’t give you a postal code. He’s not like the German buyer who gives you a German address,” Mr. Nielson says.

June 23rd, 2011 at 11:33 pm

@vanpro

It’s tough being perfect! – “Mr. Nielson acknowledged his methodology is not without flaws”

If Rudy’s methodology is not without flaws then some credence should be given to REBGV’s survey. Though a smaller sample, it may be more accurate than some might think. 🙂

vanpro Says:
June 24th, 2011 at 1:12 pm

Larry: true enough that no one is perfect, but there are degrees of imperfection and Rudy is way out in left field if he is relying on the “name” method to identify a new foreign (i.e Mainalnd Chinese) buyer. My own experience (and my own name) is foreign, non-english, non-Canadian, but I have been here for decades and I know many like me – because Vancouver (and Canada) is made up of millions of immigrants who have been here for decades and are Canadian income earners and tax declarers (thereby reorded on the income stats used in affordability measures) – not “new” exogenous foreign income/wealth used by some as rationalization for crazy high Vancouver prices…..

vanpro Says:
June 24th, 2011 at 1:17 pm

Sorry: I neglected to respond to your reference to the survey you posted: the survey (although very small sample) indicates only 8% or less are buyers from outside Canada, which would corroborate these other reports I posted that suggest the foreign buyer is a small % of the overall market.

June 24th, 2011 at 2:25 pm

@vanpro

re response: no worries 🙂

Ray Says:
June 27th, 2011 at 12:46 pm

This survey, while seemingly informative, is actually rather useless. For example:

Assuming evenly spread response rates, you still have this problem:

The questions it asks are asking realtors to “describe” their buyer. A realtor who has 9 Chinese mainlanders a month completing sales compared to say an average realtor who has 1 local new buyer sale… Now you have stats that look like it is a 50/50 split between newbuyer and foreign sale…

Or, consider a realtor with 10 clients… 4 of mainland chinese, 6 or locals. When they answer the survey, they will also say their primary buyer is local first-time.

The true stat you want is # of sales by buyer-type… not # of realtors describing their primary buyer-type.

LS Says:
June 28th, 2011 at 10:56 pm

@Ray You’re right that it isn’t great methodology, however it is not useless, and you read the survey wrong.

They aren’t asking people to describe their buyers, they’re asking people to describe their most recent buyer. So that realtor with 4 chinese and 6 locals will have a higher chance of answering local, but not guaranteed. Another realtor with more Chinese buyers will be more likely to answer that.

As for your first example, unless you have evidence that realtors dealing with Chinese buyers are busier, it will average out. There will equally be a realtor with 9 local clients whose answer is the same as the guy with one Chinese one.

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