Jay Mcinnes

Mobile: 604-771-4606

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Ben Robinson

Mobile: 604-353-8523

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Chase Nelson-Murray

Mobile: 604-671-5362

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What Will Happen To The Vancouver Real Estate Market?!

What Will Happen To The Vancouver Real Estate Market?!

Right now, I think we are safe in saying a lot of people do not have faith in the Real Estate market in Vancouver. This isn’t a hit on Vancouver, but more so, reflective of it’s fall from grace with everything Real Estate. For the longest time, a constant rise was in place, and now we find ourselves having gone through a correction, with people asking…… What’s next and when?!

So how did our market take such a hit, and why did it fall so hard in the first place?

There is not just one thing that happened to cause this. It’s a combination of events. Whether you love them or hate them, the NDP Government came into power and implemented changes which put our market into an artificial state, i.e. one which was not induced naturally. 

The aim being to make housing more affordable for non homeowners in Vancouver. It’s safe to say, the NDP favours non homeowners. That’s not good or bad, it’s just their agenda. Also, The Bank of Canada adjusted their rules on qualification.

Namely a few changes that were put into place include:

  • Foreign Buyers TAX (increased that figure to 20% in 2018)
  • Vacancy and Speculations TAX
  • Schools TAX
  • Stress Test Rules

Now this is where it actually becomes interesting. Because in our opinion, these were just a catalyst that caused the correction (Market Fear is the real culprit.) Realistically, if you are not a foreign buyer and you don’t own investment homes, or have them vacant, this is really not so much of a big issue to you. On top of this, mortgage rates are at an all time low and continue to be, so the stress test is not like you are qualifying for similar rates plus another 2%. However, even though mortgage rates remain at these lows, there are less and less people burrowing. In a way it’s become an odd paradox. Yes the market has gone through a correction and prices have reduced as planned by the government…….. Yet even with reduced prices, we are sitting at record low numbers of sales. What to do? You’ve managed to incur a correction and reduce prices, yet you still can’t get people into homes. In fact you are actually getting less people purchasing homes than before.

This begs the question, rightly so, of what happens next? 

Well seeing what happens with the federal election will be an interesting affair. The majority of the country has gone conservative, who typically have a much different view than the NDP/Liberal governments. If this were to be the case federally, we may be seeing some pro homeowner changes being put into effect to try and stimulate the housing market again. It’s not just Vancouver that has been seeing hard times in the housing market lately. With campaigns starting in the coming months, I’m sure we’ll hear more on this soon.

Of course our provincial election in BC is not until 2021, so we are a few years away from a new direction taking place provincially. However, as of February/March 2019 the government has lost out on an estimated $400,000,00 worth of property transfer TAX, as well as a large number of expected income from foreign buyers TAX due to the reduced amount of sales. That alone has clearly not been enough to steer the powers that be into a different direction. However if numbers continue to remain at all times lows there is more incentive to adjust the plan in order to recoup some of those lost funds.

Another question is the US market right now and the 25-35% (US Business Insurance and Swiss Re Ltd. Study) chance they will be entering a recession. Now there is talk for, and against what will happen there, but we’re not economists so won’t dive too deep into that one. However, depending on which way this swings, could have a pretty substantial impact on our housing market. However at 25-35% it’s still a low rate to bet either way on what will happen here.

Now the market has started to show signs of stabilizing, we think we will continue to see a more balanced market. Operating in similar ways we’ve seen in 2019 with pricing making slight fluctuations. Even with federal elections coming up, it takes time for new ideas and systems to be implemented, so don’t expect an immediate turn around any time soon. A more telling time for that will be around 2021 with our local elections.

So ultimately this ‘UNKNOWN’ is the cause of the market decline in our opinion. It works in both ways, when the market shows promising signs of upward movement, it rides the wave and people believe it will keep going up. The same happens in reverse, when the market is correcting, people will always feel it needs to correct more.But when is really the top? And when is really the bottom?

We want to hear from you on what you think will happen in Vancouver Real Estate, do you feel it will keep going down and why? Or do you feel it is about to turn around and head upwards and why? Feel free to leave a comment in the section below!

Until next week,

Jay Mcinnes
T: 604.771.4606
jay@mcinnesmarketing.com

Ben Robinson
T: 604.353.8523
ben@mcinnesmarketing.com