Blog › January 2013

BCREA revises Fraser Valley's 2013 forecast

On January 30, BCREA's senior economist Cameron Muir released the first quarter housing market forecast for BC including breakdowns for Fraser Valley and Greater Vancouver.

The 2013 predictions for Fraser Valley have changed since last fall, becoming more conservative. Muir still expects home sales to increase in 2013 compared to 2012, but not to the degree that his department anticipated three months ago. In addition, he's forecasting home prices will moderate at a slightly faster rate.

Fraser Valley REALTORS® can expect sales to increase by 2.4 per cent this year compared to 2012; and average MLS® prices will continue to slide 3.3 per cent this year on top of the 3.7 per cent reduction during 2012.

Muir states in the report, "Headwinds in the global economy continue to constrain growth in British Columbia. The US has yet to generate enough employment to take a serious bite out of their jobless rate, while early signs of burgeoning domestic demand in China weren't enough to keep economic growth from slipping to a ten-year low in 2012."

The forecast describes 2013 as a transition year to next year when sales are expected to rebound even further and prices will stabilize. In 2014, BCREA is predicting an increase of 7.5 per cent in Fraser Valley home sales and prices to remain flat (-0.6 per cent) compared to this year.

Muir describes lower home prices in the Fraser Valley as a move in a positive direction improving affordability and encouraging potential buyers back to the marketplace. "In addition, many potential buyers that stayed on the sidelines in 2012 will likely enter the marketplace over the next year as the relatively strong financial condition of BC households precludes any deflationary spiral."

For Greater Vancouver in 2013, Muir is forecasting slightly stronger sales than Fraser Valley, an increase of almost 10 per cent this year compared to 2012, and not quite as high reductions in MLS® home prices -2.2 per cent on average in 2013 and -0.3 per cent in 2014.

CMHC's Housing Market Outlook, released in the fall of 2012, anticipates sales in the Fraser Valley will increase by 1.4 per cent in 2013 compared to 2012, while prices remain relatively stable. CMHC only releases two forecasts per year — spring and fall — while BCREA releases quarterly.

For a snapshot of the Vancouver real estate market, look to the mainland


graph home prices to chinese economy

Vancouver's housing market may depend on the strength of the mainland economy as much as anything that happens in Canada.

The chart of the week shows the relationship between growth in China's gross domestic product and home prices in metropolitan Vancouver, Canada's most expensive city, where Statistics Canada data show 15 per cent of the population has a first language that's a Chinese dialect.

Bank of Canada governor Mark Carney has warned that indebted domestic consumers are a risk to the world's 11th largest economy, and finance minister Jim Flaherty tightened mortgage lending rules for a fourth time last year.

Vancouver house prices have risen as much as 73 per cent since mid-2005, pushing the average cost of a single detached home in the city over C$1 million (HK$7.8 million).

The most recent mainland data signals that Vancouver may get fresh support from across the Pacific Ocean. Annual growth in Asia's largest economy was 7.9 per cent in the fourth quarter, up from 7.4 per cent in the prior quarter, marking the first acceleration in two years, the National Bureau of Statistics said on January 18 in Beijing.

Faster growth "would support a slightly stronger Vancouver housing market", says Robin Wiebe, senior economist at the Conference Board of Canada in Ottawa and formerly an analyst at Canada's federal housing agency. "The major wild card right now is the ongoing impact of the tighter mortgage rules."


Urban Development Institute panel optimistic about Vancouver’s real estate prospects

There is no real estate bubble in Vancouver and markets will remain stable in 2013 — as long as interest rates remain low, immigration targets are met and Europe’s economy doesn’t melt down, a panel of real estate developers told more than 1,100 real estate professionals, business leaders and B.C. politicians on Thursday.

Colin Bosa, CEO of Bosa Properties, Tony Astles, executive vice-president of Bentall Kennedy, and Eric Carlson, president and CEO of Anthem Properties provided the Urban Development Institute’s annual market forecast while Diana McMeekin, president of Artemis Marketing, moderated.

Bosa said that as long as people continue to move to British Columbia, the real estate market will remain stable. He compared conditions in 2009 to those today and found that demand is similar, although immigration numbers were down in 2012 and two federal immigration programs — the investor program and the skilled worker program — are under review and could be subject to change.

In terms of supply, he said, more units were built in 2012 than 2009, but not many more than the 15-year average.

“The good news for all the salespeople in the room is, you’re going to sell lots of real estate this year, but the bad news is you’re going to have to work at it,” Bosa said, adding that projects near transit service will continue to sell well.

Southeast False Creek and Coquitlam Centre are two areas with a lot of unsold inventory, Bosa said. He said realtors in those areas might have to “sharpen their pencils” and that prices might decline.

However, he said Metro Vancouver condominium developers showed in 2009 that developers can “turn off the tap” quickly when the market slows.

Bosa said he believes people — and their money — from China will continue to flow into B.C. because they want to invest outside China and they want their children to grow up in North America.

“They like it in British Columbia because it’s safe and they’re accepted here,” Bosa said. “There is a good quality of life with universal health care and good schools.”

Two things that could stop the flow of people from China in to British Columbia would be a recession or a change to Canadian immigration policy, Bosa said.

“If you buy good real estate at fair prices, you can’t go wrong,” Bosa said. “It’s not that hard.”

Carlson said B.C. and Canada were protected between 2009 and 2011 while the rest of the world was reeling from the economic crisis. Canada did not really need the extremely low interest rates as much as the rest of the world, and the low rates coupled with immigration, stimulated the housing market.

“We felt a bit smug if we were provincial in our outlook. That ended in 2012. ... We started to feel the malaise for the first time,” Carlson said.

But he forecast that 2013 would be a stronger year because of B.C.’s ties to China and the U.S., which are both seeing economic recovery.

“I think this is the year that the fear factor goes away,” Carlson said, adding that he believes immigration will pick up this year and recovery in the housing market in the U.S. will mean many new jobs are created.

“U.S. unemployment will go down to 6.5 per cent this year, while U.S. gross domestic product will be trending towards three per cent by the end of the year,” Carlson said, adding that he thinks 2013 is a good time to buy real estate.

“I don’t think there is a bubble at all,” Carlson said.

Astles predicted the office building market will remain stable in 2013. He warned that a lack of supply means no rent relief until 2016.

He said Burnaby and New Westminster might have some oversupply, but Vancouver’s downtown is healthy. He said multi-family rentals were a low-risk investment, particularly because of limited supply.

He said there are some challenges when it comes to labour, with employees leaving for higher pay in Edmonton and points North, and with many experienced workers retiring.

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Vancouver Housing Bubble: Why Chinese Investors Will Return

Bloomberg recently published a chart highlighting the relationship between Vancouver real estate and China's economy, suggesting that what happens in China has as much influence on the city's housing market as Canada's own economic policies.

Bloomberg pointed out that China's gross domestic product expanded by an annual rate of 7.9 per cent in the fourth quarter of 2012 — up from 7.4 per cent in the prior quarter and the economy's first acceleration in two years.

Their graph established a direct correlation between China's GDP and Vancouver's housing prices — as China's GDP rose, so did Vancouver's real estate prices. If the trend holds, Bloomberg predicts, Vancouver's real estate prices should also soon rise.

Correlation isn't causation — and Vancouver's real estate market is certainly complex — but the Bloomberg research supports my prediction that Chinese buyers will be back to Vancouver real estate sooner rather than later.

Some background: Over the past year, mainland Chinese investor buyers all but disappeared from Vancouver's real estate marketplace, contributing to what was already a softening market in metro Vancouver.

But why did Chinese investors disappear in the first place? During the first decade of the new millennium, real estate prices in China were astronomic — even more expensive than Vancouver. In 2009, China introduced a policy designed to cool investor speculation in real estate. This policy, which was meant to help ordinary citizens buy their own home, stipulated that buyers could purchase their first home with 30 per cent cash down, but if they bought a second property, a whopping 60 per cent down payment is required. As a result of the policy, prices in major cities such as Beijing dropped by 30 to 40 per cent, effectively halting the investor market in the country.

What the policy did was greatly reduce the amount of cash investors had to invest in real estate, both in China and overseas.

Typically, Chinese New Year is when Chinese investors visit Vancouver and go on a shopping spree, but last year, Vancouver real-estate developers and marketers noticed the absence of the mainland Chinese buyer, a telltale sign that China's policy was working and that the overall economy was slowing down.

Here's why I think Chinese investors will return. In China, the real-estate industry accounts for 11 per cent of the country's overall GDP. Including related industries like appliances and furniture, you're looking at a hefty 22 to 25 per cent of the country's GDP. The People's Republic of China simply cannot afford to have this important industry stall, which is why I believe that the Chinese government will relax the restrictive lending policies, investors will start getting back into the market and, as their assets become more liquid, we'll see them return to Vancouver.

The brisk return of China's real-estate market means many Chinese will once again look for a safe haven to park their newly regained wealth.

While China's policy change has impacted investors' cash flow in the short term, it hasn't curbed their enthusiasm for Vancouver real estate. The sudden rise and fall in real estate prices that we're seeing now in China, as well as fluctuations in the overall economy, mean that people view investing there as no less risky than placing bets on a baccarat table. For many Chinese investors, parking money in Vancouver feels as safe as investing in treasury bills.

The People's Republic of China has a new leader in Xi Jinping and historically every change in leadership brings with it new policies to create its own legacy. I believe that with this leadership change, we will see major changes in the country's mortgage-lending policies and a renewed interest in real estate investing.

Experts predict that Vancouver's real estate market in 2013 will decline slightly, not crash. And with the likely return of the Chinese investor and the news that the Bank of Canada will hold the interest rate at one per cent, the future of Vancouver's real estate may not be as bad as what the headlines would have you believe.

A version of this article first appeared in B.C. Business.

Written by Will Lin

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Housing Prices to Decline Further, Foreign Investment Down

VANCOUVER — Vancouver's house prices could fall a further five per cent before 2013 is over, according to a BMO economist.

Sal Guatieri, BMO Capital Markets senior economist, made the prediction during a Tuesday conference call, while Royal LePage called for average prices to fall three per cent as fewer luxury homes sell.

Guatieri said tougher mortgage rules and the suspension of the federal immigrant investor program in July could be factors in Vancouver's real estate slowdown.

"Nowhere is the housing market weaker than in British Columbia, where resales are down 17 per cent in the year to November and are well below the past decade norm," Guatieri said. "Vancouver's resales have plunged 31 per cent in the year to December and benchmark prices are down just over three per cent since the spring."

He said the mortgage changes, limiting the life of a mortgage to 25 years from 30 and prohibiting mortgage insurance on homes more expensive than $1 million, will hit pricier markets the hardest. Housing prices are about 10 times average family incomes, Guatieri said, putting "Vancouver in the upper echelon of overvalued housing markets, not just in Canada, but across the world."

He said many would-be house buyers are opting to buy condos, rent instead of buy, or move to other cities because of the high prices.

Vancouver condos remain affordable, he said, but detached homes are out of reach for first-time buyers. He expects further declines in home prices during 2013.

"That would not be surprising nor exceptional as the city has faced four double-digit price corrections in the past three decades," Guatieri said.

The federal immigrant investor program allows people to immigrate to Canada if they can show they have business experience, a net worth of at least $1.6 million obtained legally and can invest $800,000 in an interest-free loan to Canada for five years to create jobs. There was a backlog of more than 23,000 applications to the program last April. In July, applications were suspended so the federal government could process existing applications and review the program.

"There is some speculation that wealthier foreign buyers are waiting to see if the government will restart that program before they purchase a house in Vancouver," Guatieri said. "What has supported Vancouver's housing market, at least in the past five years, is not income, it's wealth. A lot of that is foreign wealth, although we can't quantify that."

He said many of these buyers don't need a mortgage because they have the cash and can buy a house outright.

"But that supply of people is diminishing, especially as prices have continued to go up," he said. "Unless people continue to flood into Vancouver — foreign residents with a lot of money — that market looks very ripe for a meaningful correction — not a material one — of at least five per cent or so for the next year."

The Royal LePage Price Survey and Market Survey Forecast found that the average price of a detached bungalow in Vancouver decreased slightly year-over-year by 1.6 per cent to $1,001,250, while two-storey homes also dropped just over one per cent to $1,102,500. Condominiums dropped 3.6 per cent year-over-year to $481,250.

"The real estate market has been slow in Vancouver over the past eight months," said Bill Binnie, broker and owner of Royal LePage North Shore. "Sellers have not been bringing their listings to the market because prices have not been competitive while buyers have been sitting on the fence hoping prices will go down. The reality is that sellers are not interested in making any significant reductions in price and with our good local economy and healthy employment, there has not been pressure for them to sell."

Royal LePage forecasts that fewer high-end sales will cause average prices in Vancouver to drop three per cent by the end of 2013. Nationally, Royal LePage forecasts a one-per-cent gain in the average home price by the end of the year.

Guatieri said the decade-long housing boom across Canada is likely over and that returns on investment in real estate are likely to fall. However, he cited Alberta, Saskatchewan and Newfoundland as strong markets that will buck the trend, while prices will hold steady in the rest of the country.

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Be prepared: 2013 BC Assessment Roll out

In partnership with BCREA, BC Assessment released its 2013 Assessment Roll yesterday.

In addition to handling their own interviews, BC Assessment is encouraging the media to contact spokespeople from local real estate associations for their expertise and comment. From our Board, President Scott Olson is on stand-by armed with Fraser Valley data relevant to news outlets.

As a REALTOR®, you may receive inquiries from your clients particularly if they don't understand or are dissatisfied with their assessment, which for this year's Roll may be the situation for some property owners because their assessed value (upon which their property taxes are based) could be higher than their home's current market value.

As you are aware, but many members of the public are not, assessed values are always an estimate of market value as of July 1 of the preceding year ( five months prior to the roll being released). Therefore, if the market has fluctuated either up or down in that time, it's possible that given current market conditions a home could be "over-valued" or "under-valued."

We can all empathize with the frustration or concern a homeowner could experience if they perceive that they're being over-charged taxes on an asset that has since depreciated in value. For example, a typical single family detached home in South Surrey/White Rock is valued at $850,000 today; however the 2012 assessed value is $897,000.

BC Assessment says REALTORS® can play an important role in educating the public. Here is key information for you to share:

  • Assessed values in the Fraser Valley have been relatively stable from 2012 to 2013.
  • Assessed values are an estimate of market value as of July 1 and from July 1, 2011, to July 1, 2012, the market in the valley was relatively stable.
  • When the assessment notices are mailed in January the assessed value may be higher than the current market value because the market started to soften after July 1 (our valuation date).
  • Property owners can check their assessments using "e-value BC" on BC Assessment's website by reviewing information about their property and comparing to properties that have sold.
  • If they still have concerns about their assessment they should contact BC Assessment prior to January 31 to discuss their concerns or file a complaint to the Property Assessment Review Panel.

According to BC Assessment, most owners of single family detached homes in the Fraser Valley will see modest changes in their assessments "in the range of -5 per cent to + 10 per cent."

For more information, go to