Government Fiddle Burns Vancouver Real Estate

WD-40

Our government has fiddled and the Vancouver Real Estate Market is burning. Regardless of where you sit at the Tax argument table what is certain is that the 15% Foreign National Tax attributed to property purchases has clearly disrupted the Vancouver real estate market. Absolute is that WD-40 will not kill the fire nor stop the squeak in this government authored intervention.

Average Price 1977 – 2016

2016-09-01-Average-PriceYattermatters – Average Price August 2016

Vancouver Real Estate Average Numbers

Detached Attached Apartment
August 16 – $1,470,265
0%
August 16 – $730,189
+18%
August 16 – $528,808
+ 1%
August 15 – $1,474,475 August 15 – $615,557 August 15 – $521,666

Vancouver Real Estate Inventory – Active Listings

Detached Attached Apartment
August 16 – 4,963
+10%
August 16 – 1,062
-26%
August 16 – 2,481
-50%
August 15 – 4,478 August 15 – 1,383 August 15 – 5,036

Vancouver Real Estate – Units Sold

Detached Attached Apartment
August 16 – 722
-44%
August 16 – 431
-25%
August 16 – 1,343
-10%
August 15 – 1,301 August 15 – 578 August 15 – 1,494

*Percentage = YOY

Chaos

WD 40

In July 2016 the average price for a Vancouver detached was recorded at $1,764,682. In less than a month (post Tax proclamation), the average price gain over the year of approximately $300,000 has been wiped out. August 2016`s average price for a detached home flat lined at $1,470,265 to settle below August 2015`s average price of $1,474,475.

While that price drop is worrisome more critical is that the number of sales has tanked to 44% below August 2015. Price is one thing but when there are no sales you don’t have a market. A certainty rests in this dramatic lack of sales. Should it continue future market predictions become more tenuous than ever. More curious will be the evolution that is about to take place. What will be the result from the multiplier effect of this drop in price and sales?

The chaos created by our government fiddle playing will I suspect, continue for the next months ahead. At some point it may become clear that elements beyond the currently perceived influence of foreign buyers could have played a greater part in determining the market place.

The outfall of this new tax is yet to be fully realized. Real Estate in Vancouver directly and indirectly generates cash flow to many ancillary businesses. This government intervention which supposedly was designed to “clean and protect” may well start a impenetrable rust in the economy – a reaction neither envisioned or hoped for that could render the ability to purchase a Vancouver home more difficult.

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:

Deniro Says:
September 1st, 2016 at 2:40 pm

Thank you Larry.

Interesting.

Can you let us know what’re coffee talk chatter is at the moment?

Interesting inflection point, or so it appears to some.

Bo Xilai Says:
September 1st, 2016 at 5:27 pm

Burn, Baby burn is all I have to say… for too long Vancouverites have made more sitting on their dirt than actually working… Karma’s a beyotch…

MikeS Says:
September 1st, 2016 at 5:37 pm

Wasn’t August 2015 unusually active? Can you compare the numbers to Aug 2014 or the 10-year average?

Beard of bees Says:
September 1st, 2016 at 6:19 pm

I was hibernating but this woke me up all right.

Keep the stats coming Larry!

Purr purr jones Says:
September 1st, 2016 at 7:07 pm

Larry this comment “The outfall of this new tax is yet to be fully realized. Real Estate in Vancouver directly and indirectly generates cash flow to many ancillary businesses” while this is true high house prices forces people to take out monster mortgages which in turn leaves them with less money for other things.. The wealth effect from RE is good but only for so long. Time for the much needed correction to reset prices and peoples expectations for real estate. Some pain will be felt as the patient is sick however things will eventually get better and everyine will be better off in the long run with lower real estate prices.

lookout Says:
September 1st, 2016 at 7:11 pm

WD40 is actually quite flammable. …that hockey stick had to break sooner or later. …once the average Joe sees this panic will set in.

Slava Bure Says:
September 1st, 2016 at 9:16 pm

I am hearing that groups offshore are waiting for prices to drop then swoop in. Exchange rates will be amplify the discounts.

Ah Says:
September 1st, 2016 at 9:38 pm

Solution:. If you are Chinese and is a foreigner, you get a
tax rebate for 15% if you flip houses in Vancouver.

Fortune500 Says:
September 1st, 2016 at 9:43 pm

There is a lot of hyperbole on both sides of this issue. For one thing, how can we panic about sales when this is the first month the new rules took effect. Isn’t it reasonable to assume many sellers would want to wait a bit to see how things play out? I would think most prudent buyers would wait a few months to see how the dust settles.

Using this months stats to panic pressure the government to change back is a knee jerk reaction. Let’s all take a moment to breath and seek clarity. Remember that Vancouver? Clarity and time to process? Those were the days …

And besides, as realtors have explained to us, most of the market is made up of wealthy local buyers with lots of equity and income, so this tax really is a non-issue, right? Right ….

Anon Says:
September 1st, 2016 at 10:00 pm

Exactly, the government should not be involved in manipulating the housing market.

Government should be immediately stopping:
1) Home Buyer Program – borrowing from RRSP for a down payment.
2) Zero Capital Gains Tax on Principal Residence – tax it like any other capital gain.
3) CMHC insured mortgages – there should be zero government involvement in insuring mortgages. Banks should require down payments and amortization periods based on their own prudent lending practices, not taxpayer backed lending.
4) Bank of Canada setting interest rates – the BOC should be abolished, interest rates should be based on supply and demand for funds, not based on an unelected bureaucrats whim.
5) Foreign ownership – the only people who should be able to own Canadian dirt is those who are entitled to vote. Become a citizen if you want to own the dirt. Canada should not be for sale.

Sherlock Says:
September 2nd, 2016 at 2:45 am

holly molly, that’s a very steep correction.

Boombust Says:
September 2nd, 2016 at 7:27 am

Yet again, I see the REBGV is reporting quite a different scenario from others (like you) are saying. In other words, the usual BS.

David Says:
September 2nd, 2016 at 9:56 am

I am looking for clarification on your YOY average prices table. The REBGV is reporting a 35.8% increase in YOY prices for detached homes, while you state it is flat (slight decline). There are similar differences in townhome and apartment property prices.

September 2nd, 2016 at 10:23 am

@David,
well sir that would be the difference between Average and Benchmark.
From REBGV – “The benchmark price for detached properties increased 35.8 per cent from August 2015 to $1,577,300. This represents a 4.2 per cent increase over the last three months”

Rob Says:
September 2nd, 2016 at 1:08 pm

Just a follow up from the short trade I entered in April:
“Vancouver, where house price charts look like a penny stock trading on the old VSE.

If this were a penny stock, would make a great shorting opportunity. Sell order under $1.78M, with a stop loss just over the high. First take profit at $1.4M then look to break below $1.2M Perfect setup!”

Currently I’m up $300k, and looking to take my first profit off the table in September. Better than working for a living!

jake Says:
September 2nd, 2016 at 1:44 pm

The average price dropped a fair bit, but all this tells me is that house prices are still going up, it is just that there are way less $30 and $40 million dollar homes selling now.

James Says:
September 3rd, 2016 at 12:49 pm

Real estate does not generate cash flow. Real business that meet real needs generate cash flow. Housing is just shelter, nothing more than that. If you had bough Microsoft at it initial public offering you would have enjoyed a 25% annualized RoR from inception. That is a business that generates cash flow.

Robert Says:
September 6th, 2016 at 2:00 pm

A contributing factor that may have been apparent from the beginning of this year is that the panic outflow of wealth from China the past 3 years ahead of the ongoing corruption crackdown is running out.
You would think that most of the crooks have either gotten their family and wealth out of the country by now or are in jail.

Binder Dundat Says:
September 11th, 2016 at 11:38 am

Out of the shadows

Kathy Tomlinson reveals how loopholes and lax oversight are making it easy for a network of local and foreign speculators to play the system, and, in the process, fuel the steep rise in Vancouver home prices

http://www.theglobeandmail.com/real-estate/vancouver/out-of-the-shadows/article31802994/

What knowledge do you have of this practice, Larry?

September 11th, 2016 at 6:43 pm

@binder Dundat
Interesting!

Purr purr jones Says:
September 11th, 2016 at 6:45 pm

What a circus the Real Estate market is – one big Ponzi scheme.

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