2018 was an interesting year for Vancouver real estate. The three preceding years had seen a very hot and competitive market, but this changed suddenly last March. This was due to both a drop in demand, and a “group think” that followed.
Two main factors influenced a drop in demand.
First, the mortgage “stress test” reduced the value of what buyers could afford, or prevented them from buying at all. The stress test applies to your approval an interest rate that is notably higher than the rate that will actually be applied to your mortgage.
Second, regulatory measures impacted demand: 2018 saw both increases to the foreign buyers’ tax (from 15% to 20%) and the introduction of the empty homes tax (1% of the assessed value). Sales volume dropped by 25%. The drop in demand then led to “group think.”
Video: 2018 Vancouver real estate market review & 2019 market opportunities
As the media covered the drop in demand, buyers who initially had both the ability and desire to buy left the market temporarily to wait and see what would happen.
The drop in demand continued all year. House prices had been inching down since October 2017, but the latter half of 2018 saw condo and townhouse prices finally starting to inch down at a rate of approximately 1% per month.
At the end of the year, house prices had dropped 8% compared with the beginning of the year. Currently, condo and townhouse prices are on par with the beginning of 2018.
Opportunities in Vancouver real estate
This means that there are currently opportunities for a few groups of people in particular:
- First-time Homebuyers: As conditions are favourable for buyers, now would be a good time to acquire a first property. Remember that the BC government’s First Time Home Buyers’ Program remains in effect.
- Up-sizers: Rarely is the gap between condo/townhouse prices and house prices this small. For those hoping to make the jump from attached house to a detached home, now would be a good time.
- Investors: There are well-priced properties on the market right now. Investors may be able to pick up a fantastic addition to their portfolio. Demand is down Vancouver-wide; targets to look for would be listings that have been on for a while and have reduced the list price 1-2 times. The price reductions would indicate motivation, and the length of time on market should result in a ‘weakened’ seller.
As we enter 2019, the key question is: just as the market turned suddenly in March of last year, will it turn suddenly this year and return to typical levels of demand and sales volume for Vancouver?
Only time will tell.