Taxes, Rain on Vancouver Average Home Prices

Sunshine and Lots of Rain

Our government’s sunshine dream that a foreign national property purchase tax would improve affordability, has after two solid months of rain, washed away. The accumulation of rain appears to have affected the Vancouver market as average prices once more floated upward.

Average Price 1977 – 2016

2016-12-01-average-priceYattermatters – Average Price Nov 2016

Vancouver Real Estate Average Numbers

Detached Attached Apartment
Nov 16 – $1,612,469
+ 2%
Nov 16 – $763,331
+11%
Nov 16 – $562,160
+12%
Nov 15 – $1,579,170 Nov 15 – $630,018 Nov 15 – $500,084

Vancouver Real Estate Inventory – Active Listings

Detached Attached Apartment
Nov 16 – 4,724
+40%
Nov 16 – 1,092
+09%
Nov 16 – 2,569
-31%
Nov 15 – 3,356 Nov 15 – 995 Nov 15 – 3,745

Vancouver Real Estate – Units Sold

Detached Attached Apartment
Nov 16 – 643
-52%
Nov 16 – 376
-40%
Nov 16 – 1,200
-22%
Nov 15 – 1,344 Nov 15 – 636 Nov 15 – 1,553

*Percentage = YOY

Money, Water, Least Resistance

Vancouver home sales are down substantially and have provided fodder for pundits lauding the success of the foreign national 15% purchase tax. Yet average prices are holding or rising further squelching the possibility of affordable housing. It’s a dilemma that is spreading.

The nature of money and water is to find least resistance. Compared to a year ago Vancouver’s market has changed but that change has spawned market issues for outlying communities. As example consider quiet, staid Victoria that now feels ‘the money’ pouring into their market.

rain_man-under-umbrella-in-field-500

Vancouver’s earliest talking heads said it couldn’t happen here. Now, their same stories emanate from Victoria.

They use nice words such “interesting question”, “anecdotal evidence”, “it could go either way”, “I wish we had stats”, “gauging the ripple effect could be difficult”. Words Vancouverites will recall as all too familiar.

Were you to make a best guess – one that is probably as good as any made by these talking heads, it would be that communities outside of Vancouver are about find themselves in a predicament equal to Vancouver’s

Since you are in the mood, throw another pebble into the talking head pool with this guess.

Our Cherub Premiere is ramping up her need for votes and in a Super Natural moment will empty her foreign tax bucket at currently tax free communities still not understanding that her action will not stop the rain of ever increasing home prices.

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:

Darren D Says:
December 2nd, 2016 at 6:44 am

Sales volumes first then prices. Also – the average in such a relatively small sample, is affected by the movement of mix. We are seeing now the lower end is slowing due to mortgage restrictions, while the higher end is staying steady with the previous months – and this change in mix, is again increasing the average – if only modestly. We will, however, expect to see the benchmark again reduce this month by around 1% on the main markets affected by the tax.

I appreciate your feeling of being opposed to the tax – but frankly, get over it – people don’t want the real estate of Vancouver to be left empty by out of town purchasers – regardless of where they are from (Alberta or Vladivostok or Beijing). Thus, the combination of stopping the purchase (foreign buyer tax) and getting these properties back onto the market (empty homes tax) will bring the market back into a local equilibrium. This may come at the expense of the equity of the current home owners – but most of these gains were on paper and not something they were entitled to in the first place.

December 2nd, 2016 at 8:42 am

@Darren D
why were they not entitled to the gains?

canuck Says:
December 2nd, 2016 at 11:25 am

Kind of sad to see local realtors almost cheering at the idea that the non-resident tax won’t help locals with our affordability crisis.
Average price for SFH is still way off the highs reached earlier this year, the slight blip is probably due to the recent accelerated devaluation of the yuan, as well as our dollar.
Sales are a disaster, which is typically a leading indicator of where prices are heading.

Darren D Says:
December 2nd, 2016 at 3:11 pm

@Larry.

Your home is for shelter. This should not primarily be an investment – it is not a sure-thing to riches, it is not a well-diversified investment strategy, it is not an income-producing asset, it is a terrible allocation of capital, and in Vancouver it is dependent on external capital coming into the market to allow it to continue to maintain its current value. Sorry – but this value is nobodies right. No different than if I bought an income trust unit 15 years ago – then the government comes to change the rules – and then I lose 50% . . Too bad for me. (Too bad for the Vancouver homeowner as we continue the slow bleed).

You also do not have a 100% full right to use it as you wish – you are subject to the zoning laws and bylaws of the city – you are subject to the taxation laws of the city, province and country. These are not static and can change. If they change and affect you – then too bad.

You should generally expect that your asset will remain in balance to the economics – – however – if the economics move far away from the underlying economic fundamentals – due to external factors – which not only are allowing your property to increase, but are also causing other external factors in the city (such as empty properties, poor housing options for people of ALL (emphasis added) income levels) – then you can expect that regulations will be implemented to reduce the value of the property. Where I live (which is now far away) – people have the highest incomes in the world – – and frankly – housing costs are completely in line with income and nobody in anything which is not indicative of their incomes. People don’t speculate, gains are not actually allowed under the tax laws, and frankly – housing is for shelter. So – if people where I live make even a 5-10% on their property, they know it 100% belongs to the government.

The people of Vancouver have had it too good – and if they manage to get a bit of gain – on top of the shelter benefit that their house provides – then good for them – but they are not entitled to it. They are entitled to shelter – free use for their own use as their own house – but nothing else. If they make a gain – good for them.

I’m surprised you would ask such a question.

I have followed you for close to 10 years. You have always had a good view on the market – especially the old Coffee Talk. . . But – your bias against the foreign buyers tax has really caused me to question you. The tax is 100% a good thing. Why should any of the real estate in Vancouver be available to non-residents for their part time use when there is a clear shortage for the local economy. This is not Maui – or Whistler – this is a functioning city economy that requires shelter to be provided to the residents to be able to contribute to the local economy (and fill schools – and shop in shops . . ) – – Anything else at this time is something that should be discouraged.

And – my computation was correct – – we are off another 1% this month – – with even larger decreases in Richmond and West Van . . go figure – – –

December 2nd, 2016 at 3:48 pm

@darren,
Fascinating point of view.
For someone who doesn’t live here your concern for Vancouver is noted but I wonder, is there a Vancouverite or for that matter a Canadian, who would buy into your statement – “if people where I live make even a 5-10% on their property, they know it 100% belongs to the government?”

Would make for an interesting survey don’t you think?

CanadianLiveInVancouver Says:
December 3rd, 2016 at 10:02 am

is there a Vancouverite or for that matter a Canadian, who would buy into your statement – “if people where I live make even a 5-10% on their property, they know it 100% belongs to the government?”

I’m a Canadian Living In Vancouver, and I’m for it. To add on it, any such gain government receives should go to public service.

Simply put, making money at the cost of other people who can’t afford ever increasing multi-million dollar homes, and at the cost of future generations (including their own) is not the right thing to do.

To avoid Vancouver becomes a ghost city, in my opinion, more, not less, regulations are needed.

December 3rd, 2016 at 10:13 am

@Canadian living
thanks for your response and in so doing you have opened another pandora’s box. Can you trust that the ‘gain’ will actually go to public service – something you haven’t defined.

CanadianLiveInVancouver Says:
December 3rd, 2016 at 2:49 pm

Larry,

Yes, it’s not so easy to make sure the fund goes to public service. Well, it’s difficult to put up any kind of regulation. Or even further you can say most of the right things are not easy to do.

So, you see, give just a little bit thought of it and you will realize that such difficulties and probably some flaws or loopholes are no reason of not doing it.

It’s the will or perspective stopping one doing the right thing, not the difficulties or imperfection of the result.

December 3rd, 2016 at 4:04 pm

@CanadianLive
idealism always gets in the way of reality.

CanadianLiveInVancouver Says:
December 4th, 2016 at 9:35 am

Larry, reality is the result of ideology.

Jim Says:
December 4th, 2016 at 8:07 pm

Im a long term lurker and infrequent poster.
Larry, I appreciate the effort you put into you blog-thank you.
I own a couple houses, West Van and on Bowen. I feel very lucky to have been on the property ladder for 30 years. But I took few vacations, drove older autos, deployed thousands of hours of personal sweat equity on my houses, buy my clothes at outlet malls and Costco. So yah, if my houses go up in value and I benefit, I’m entitled. Just like all the dumb ass geeks that were early investors in Apple, Facebook and now, God forbid, twitter. I worked my ass off,got lucky, and that’s the way it rolls.

December 4th, 2016 at 9:27 pm

@jim,
Lurk away…

Long term, thirty years, sweat equity – funny how those ‘real’ words never seem to be part of the ‘idealogy’ conversation.

Just stirring the pot. 🙂

michael Says:
December 5th, 2016 at 10:12 am

“This may come at the expense of the equity of the current home owners – but most of these gains were on paper and not something they were entitled to in the first place.”

Larry, first time posting, thanks for the work!

I buy something. I own it. I might make money, or I could loose money if I decide to sell what I own. Or would everyone want the government to decide what you can/can’t sell. Seriously?? Is this just a case of someone renting in Vancouver having an attack of sour grapes? Does this comment only apply to Vancouver or do all home owners across Canada apply?

December 5th, 2016 at 1:04 pm

@michael
Welcome to the noise 🙂

I am not certain but I recall France has what I think is a tempered approach that addresses some of the flip/resell issues we have here. It’s a 7 year reducing tax scale on property gain where year 1 sale = 100% tax on the gain and then reduces to zero by year 7. Someone can confirm this.
Michael, would you find that amenable?

I am of the view that the 15% tax proclaimed by the Victoria bunch was reactionary (think election and the noise Eby was making). They shot from the hip with a sawed off shot gun. BTW this is not saying that the opposition would have provided a different solution.

Fortune500 Says:
December 7th, 2016 at 12:17 am

What are your suggestions from the ‘Got Mine’ crowd for my generation (Y) or my children? Since no amount of ‘nose to the grindstone’ saving or investing is going to get us on the property ladder (no rich parents for me), would you suggest we all just leave? I actually think that short-sighted attitude suits many just fine.

Not the Canada I grew up in.

December 7th, 2016 at 2:09 am

@fortune500
“would you suggest” – sure I’ll go out on a limb. I suggest that you do what you gotta do to enjoy your life where ever you are. It’s a short ride.
As for “Not the Canada I grew up in.” Very true and it never will be so again.

Rob Says:
December 10th, 2016 at 1:55 pm

Larry your listing at 2735 W8th was originally listed at $2.5M and sold for $1.63M – almost back to the July 2015 assessed value.

What does that tell us about the market?

December 10th, 2016 at 3:43 pm

@Rob,
“what does that tell you”.

Not much so don’t get your hopes up!

A heritage classification – in this case “C”, implies uncommon rules that demand extra ordinary time (perhaps 24 months) and money to fulfill HRA requirements to obtain a development permit. That process is an escalating price driver fraught with financial risk. Meeting HRA requirements is a daunting process for the uninitiated/experienced developer/builder. This eliminates a great proportion of the market for that type of property ergo the price. Additionally, the home had not been kept up and requires a bunch of money just to make it serviceable.

New ‘green’ building code plus City hall rules, fees development permits account for a substantial sum when trying to build or in this case rebuild pre 1940’s home. This flies in the face of achieving affordability via older homes and while a great vision, the bottom line is that someone has to pay for all that ‘goodness’. No surprise here either – it’s the consumer.

The idea of maintaining a heritage building is a wonderful concept, good for neighbourhoods and more. The problem is this type of property incurs costs beyond that which you might presuppose and leaves us with this problem. It’s a nice idea as long as somebody else pays for it.

Rob Says:
December 11th, 2016 at 9:51 am

Thanks Larry.

I would suggest a few months ago almost no one gave a hoot about any of that in the rush to get in, like buyer of 2365 W8th 3 doors up, who paid $2.58M in June for a comparable property (House appears in better condition, but $950k will get you a helluva renovation).

dave Says:
December 12th, 2016 at 9:33 am

Hey Larry, who determines heritage status, homeowner applies for it, or does the city determine?
I don’t see any advantage to it…
thanks…Dave

December 12th, 2016 at 9:37 am

@dave
city – it does have its benefits. IMO what needs serious adjustment is how much the benefit costs the individual for the good of all. Density appears to be the only feather in city hall’s quiver.

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