Canadian housing market crash not in the cards 

Contradictory to what the central bank said that the Canadian housing market could be overvalued by as much as 10 to 30 percent, Governor Stephen Poloz said on Thursday that the Bank of Canada does not foresee any sharp rise of unemployment and mortgage rates that might trigger a major housing market correction.  Speaking in New York, Mr Poloz said that the probability of such a big drop in prices is low.  

" The risk comes when some catalyst sets off the vulnerability", he said.  " In this case it would be, let's say, a rise in unemployment, a significant rapid rise in mortgage rates, neither of which we're expecting"

He also told an Economic Club of New York business audience that he doesnt think of the Canadian housing in "Bubble" or in any "Bubbly-type" way.  He also said that a return to sustainable economic growth which Canada is estimated about two years away, would require continued financial innovation.  He pointed a need for expansion and innovation in terms of bond financing; securitization to create new high-quality, low-risk products; peer to peer lending; and public-private partnerships.

Stats Can reported on November 13, 2014, that new homes sales cost less in September of this year than a year ago in Vancouver.  There was no change in August but the New housing fell 1.2% compared with last year September 2013.  While across Canada, there was an increased of 1.6% year over year for new housing.

Calgary is the most increased in new home pricing compared to other areas in Canada, it jumped 4X more than the average in 12 months,  The cost of new apartments or condos are not included in this calculation, according to Stats Canada.

Metro Vancouver's high end housing market have surged 35% higher defying the predictions of a slowdown after Ottawa close down the immigrant investor program in February.  

572 Properties in Metro Vancouver with at least a price tag of $3M and more range  were sold in the first 8 months, this includes 135 homes in the $5 Million and more according to Macdonald Realty Group statistics, compare to 422 properties ($3M or higher range) in the first 8 months of 2013 and including 112 homes that were in the $5 Million range.

$3 MIllion is the new $1 Million now in the real estate cirlcles on the West Coast since 55% of detached homes are now in the $1 Million or greater based on their assessment by the city of Vancouver Andrew Yan.  About 37,800 properties made it to the Million-dollar club last year.

Transaction of at least $3 Million homes are headed towards a new annual high as per Dan Scarrow of Macdonald Realty, which contrary to expectations that some rich Chinese immigrants would avoid investing here due to scrapping of the federal immigrant investor program.  " There is confidence in the Vancouver real estate market.  Peole within the market itself are trading and there is also money flowing from the outside" Mr Scarrow said in the interview.  

Recently, I came across an article written by BIV .  Vancouver has consistently ranked as the most expensive city to live in Canada but surprising that only 20% of the top 25 wealthiest neighborhoods in the country can be found here in the Lower Mainland according to this report.

They ranked the average net worth of household, Shaughnessy area (Vancouver) comes number 4 on the top 25 list, Shaughnessy area is located along the neighborhood of Granville street area from West 29th avenue to West 39th avenue, houses in this neighborhood average over $3 million while the household average net worth is $12 million and the household average income is $777,184.  according to BIV.

The other Vancouver neighborhoods that made to the list were Kerrisdale,West Bay & Sandy Cove in West Vancouver and Shaughnessy Center.

May Home Sales jumped to 13.9% in B.C., it was the biggest increase in a number of months since the 2008 recession.  The B.C. Real Estate Board Association mentioned that there were 8,729 home sales last month which makes a total of $4.9 billion dollar which is said to be an increase of 20.6% compared to May of 2013.

It also mentioned that  there was an increase of 5.8% to the average price of home from last year, the new home average rose now to $565,233.  Sales in Greater Vancouver also were at par with the rest of the province, also rose to 13.4%.  More increase in sales percentage wise on Chiliwack and Fraser Valley which were 21.9% and 19.7% respectively. It was also the strongest home sales since 2007 where 8,700 homes were sold, although it is still fall short in comparison with 11,000 sales in May prior to recession times in 2006 and 2007.

The 2008 financal crisis brought deep impacts on the global housing market and B.C. Homes sales had fallen significantly during those times in May 2008.

On March 24,the Conference Board of Canada reported that China's increase in gross domestic product (GDP) caused a positive impact on the housing market in Vancouver.  The report also mentioned that the influence of China's economic state on our housing market should not be underestimated as it is the biggest drivers behind housing activity in the area.

The report also said that observers need to pay a close attention to China's economic health when doing the assessment of Vancouver's housing market, it also suggested that Vancouver market welcomes Chinese GDP growth more than the Canadian low interest rates and rise in local employment.  If  the Chinese economy is indeed improving, it might starts to rekindle both the new and resale demand in the Lower Mainland.

The report also looked back over the past couple of decades, where the trend of sales in Vancouver home sales can be correlated to the Chinese economy trends.

- 1990s, China's GDP growth was "sluggish" with annual growth rates around 3.8% - 7.8%, correspondingly, Vancouver housing market was relatively slow even though the local economy was good and the employment was at 2.3% increased annually and the population growth was at 2.5%

- 2000s, Chinese GDP grew by over 8% annually, effect - Vancouver housing market took a dramatic upswing!

The pattern seems repeating again today, wherein Vancouver's employment growth was 2.1% per year average from 2010 - 2012, while population also grew 1.6% with low mortgage rate which should lead to more active housing market but over the same period, China's GDP growth came to 12-year low and Vancouver's housing market resale volumes fell to 23% in 2012.

Vancouver Home Sales in February picked up compared to the same month a year ago.  Home Sales came in 2,530, based from Real Estate Board of Vancouver.  Sales were up more than 40% from 1,797 last year and also 1760 last January.  This homebuyer demand in February is consistent witht he typical housing market as per president of the Vancouver board Sandra Wyatt.

February Sales of 2,547 were in line with Vancouver's 10 year average for this month.  The number of new listings for detached, attached and apartment properties in Greater Vancouver totalled 4700 in february compared with 4833 new listings last year, while there were 5345 new listings in January 2014.

The MLS Home Price Index composite benchmark price is up 3.2% of $609,100 from a year ago.

Good news for first time home buyers.  The government has announced effective February 19 (tomorrow), they will bring up the qualifying home for First time Homebuyers.  Under the Property Transfer Tax (PTT) First Time Home Buyers Exemption program, the qualifying home can worth up to $475,000 now then the previous threshold of $425,000.

There wil be a partial exemption between $475,000 and $500,000.  It was estimated that there wil be 1700 additional first time buyers who will be eligible annually to save up to $7500 in PTT when they buy their home, this will cost the government lost tax revenue of $8Million annually.

The Real Estate Board, together with BCREA, has been lobbying to make home ownership more affordable for first time home buyers for the past years.  As a result, in 2008, the provincial government increased the threshold from $375,000 to $425,000, in 2005, from $275,000 to $325,000.

Metro vancouver home sales bounces back this January 2014 after a sluggish sales in 2013 where the sales were below 10-year average, this according to Real Estate Board of Greater Vancouver.

Here are the 10- year average benchmark increase in January 2014

          Detached Homes  $ 929,000  up 3.2%

          Attached Homes    $ 457,700  up 1.7%

          Apartments             $ 371,500  up  3.7%

This year january, home sales reached 1,760, up by 30% from previous year of 1,351 homes.  While December, 2013 home sales was 1,953 homes, which is down still by 9.9%.

Home sales in Greater Vancouver surged to 71 percent last month.  There were 1,953 properties changed hands on the Multiple Listing Service, way higher from 1,142 homes sod in December 2012, according to the REBGV.  It also said to be the 8th consecutive month that Vancouver has experienced a year-over-year of gain in monthly sales following a 19-month slump before it begins to picked up last May.

Above is the list of world's unaffordable cities from Demographia's 2013 list.  Vancouver in second place, while Hong Kong is the top most unaffordable city, while London in thirteenth place.

With Canadian cities, especially Metro Vancouver becoming infamous for unaffordability in regards to real estate, some voice has been added to those asking the federal Conservative government to collect data on the influence of investors - foreign and otherwise - on the country's housing market.

Media reports also mentioning London. England has becoming badly distorted by ultra-wealthy foreign owners, referred to as "non-domiciled residents".  The influence of such buyers, including Russian tycoons, is said to be causing London's housing prices to "lose touch with reality"/

If that's what the British media are saying about London, I wondered what would they say about Vancouver, which Demographia judges the second most unaffordable city in the world next to Hong Kong....?