Sunday, January 31, 2010

Real estate sales: the China factor

How important is the China factor in affecting sales of real estate in B.C?

"Being a small town with an abundance of modern amenities should make Kelowna a shoe-in for growth coming out of the recession, but not being an immigration hub could be slowing its progress".

During an Urban Development Institute meeting yesterday, Neil Chrystal, president of the UDI Pacific Region and CEO of Polygon Homes Ltd. gave his take on the local real estate market, noting he was surprised by some of the incongruencies between this city and Vancouver.

  • “Vancouver bounded back and Kelowna got nothing,” said Chrystal, adding he’s wondered what the difference could be and landed on the lack of appeal to the Asian consumer.
  • “Vancouver is a great destination for people from mainland China,” said Chrystal, to the roomful of developers and industry experts. “We had that and you didn’t and you couldn’t replace the second home buyer.”
Read the full article here>.

China housing market.

An article posted on Seeking Alpha "4 Reference Points on China Real Estate" raised the question whether there’s a housing bubble in China.

The influx of money from China is an important factor contributing to the strong run up in home prices in metro Vancouver the past 8 years. A fascinating interview in this month’s (January) issue of China International Business magazine with Zhang Xin, the CEO of SOHO China revealed her thoughts on the real estate market in China.

"She is unambiguous in her belief that her industry is in the midst of a bubble."

A downturn in the housing market in China could have a significant impact on the housing market in metro Vancouver.

View Vancouver homes for sale here.

Monday, January 18, 2010

Vancouver housing market: Vancouver is different?

Vancouver property still good buy for post-Olympic era

Following a Royal LePage's recent forecast that property in western Canada's largest city would rise 7.2 percent this year, Bob Rennie, principle of Rennie Marketing Systems, Canada and USA, told Xinhua in an exclusive interview that Vancouver properties would conservatively rise 4 to 4.5 percent in 2010, which would present an ideal opportunity for investors.

"Every market has people who want to jump in and jump out, but there is something unique about Vancouver that once people get their name on title they tend to hold and that's what maintained prices. And a very low vacancy rate has maintained prices on property price
s." With Chinese-Canadians about 300,000 of the city's 2.2 million population Rennie said Asian investors were increasingly an important factor to the market, accounting for about 25 percent of the overall sales.

"With the amount of money being made in China, and with the acceptance of China to Vancouver, we have to be in the top two places on the planet for China to look at, to move money to. We see it happening right now, it's happening a lot. It used to just happen in the luxury market, now it's happening in all the market."

Read the report here>.

Will the Vancouver housing market keep up with the steady price gain, or suffer a sudden collapse?

View Vancouver homes for sale.

Sunday, January 17, 2010

Greater Vancouver Real Estate - Supply & Demand

A few months ago, "Housing Analysis" posted some very interesting data on the supply and demand for homes in Greater Vancouver. The period covered was from January 2005 to October, 2009. View the link here>.

The average monthly sales for 2005, 2006 and 2007 was around 3,500 units, with seasonal higher sales from April to July and the lowest level of sales around December and January. The average listings was around 10,000 to 12,500 homes. The MOI chart showed that during the above 3-year period, the inventory was fluctuating around 4 to 5 months of suplly.

Months of inventory

A balance market is generally when there are around 6 months supply of homes. When the "months of inventory" (MOI) is above 6, home prices tend to fall. When the MOI is below 6, the market is bullish and home prices tend to go up. From May 2008 to March 2009, the MOI exceeded 6, and home prices fell. When the MOI fell below 6 in April 2009, home prices rebounded.

The Greater Vancouver real estate price chart below is seen to confirm the strength or weakness in the housing market.

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Friday, January 15, 2010

Historical listing data for Greater Vancouver

Home prices are affected greatly by the supply and demand for homes by home buyers and sellers. The chart above from the Real Estate Board of Greater Vancouver showed a steady drop in listings (reported for the month of December) of 1997 to 2003.

The supply & demand chart to the left showed that the housing market suffered an overload of supply when sales dropped sharply between April 2008 to March 2009 as a result of the credit crunch.

Home prices dropped by 15% or more in less than a year. However, by May 2009, home buyers returned in large drove, bidding up prices as there were more buyers than sellers.

Buyer vs Seller market

The balance of power between buyers and sellers can be tracked by following the list/sale ratio graph below:

The running 3-month list and sale ratios as shown on the chart to the left for 2008 and 2009 showed that there was more up-ward pricing pressure since July 2009 when the list to sale ratios was less than 3.

The market can only re-balance when more supply is coming into the market, or the sale pace slow down. It will appear that this may not happen until after the second half of 2010.

The housing market after the winter Olympics

While the public are inclined to speculate that the market will slow down after the winter Olympics, there are others who are cautiously optimistic that that housing market may be able to sustain at current level of activities. If a stable supply and demand for homes can be maintained, CMHC and others maintained that a moderate price gained for 2010 can be expected.

The next few months list sale ratios will be able to tell us more about the future direction for metro Vancouver's housing market.
View Vancouver homes for sale.

Thursday, January 14, 2010

BC November Residential Sales

November Home Sales Continue at Torrid Pace

Vancouver, BC – December 9, 2009. The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province climbed 165 per cent to 7,182 units in November compared to the same month last year. Last month posted the highest number of MLS® residential sales for the month of November since 2005, when 7,721 units changed hands. Triple-digit gains in province-wide unit sales reflect a low number of unit sales in November 2008.

“BC home sales remained at an elevated level in November,” said Cameron Muir, BCREA Chief Economist. “Low mortgage interest rates, pent-up demand and strong consumer confidence continue to be key drivers in the market.”

The torrid pace of home sales in the Fraser Valley, Vancouver and Victoria has propelled the provincial total to near record levels. However, consumer demand in these markets is expected to moderate in the new year as pent-up demand is largely expended and higher home prices erode affordability.

Year-to-date, MLS® residential sales dollar volume increased 21 per cent to $36.8 billion over the same period last year. A total of 79,325 units were sold in the first eleven months of 2009, up 19 per cent from 2008, while the average MLS® price increased 2 per cent to $463,555.
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Tuesday, January 12, 2010

Metro Vancouver Housing Trend

Housing trend since 1977

From 1997 to 2001

Greater Vancouver's last bull market started towards the end of 1984. and lasted until the end of 1994. Home sales dropped yearly, along with home prices and reached a bottom around 1998. View the price chart here.

From 2001 to 2007

When buying interest returned to the market in 2001, you will notice that there was not enough supply of homes to keep pace with demand. New home construction was pushed to the limit, as strong demand for housing continued un-abetted until the end of 2007. From 2001 to 2007, home prices more than double in values.

The correction in 2008

The credit crunch in 2007 and early 2008 caused a major pull back in buying interest, resulting in home prices declining 15%. The panic of 2008 was quickly replaced by market optimism, when interest rates were slashed from 4.5% in Nov, 2007 all the way to 0.25% in Apr 2009.

Will home prices collapse?

There are great concerns in the market place that home prices are too high. There are major concerns on higher interest rates, pending HST which will affect the housing market and the weak Canadian economy in the midst of a world wide recession.

The metro Vancouver housing may be at the cross road. Market confidence is the key. Home prices are hinging on what happens after the winter Olympics, interest rates, HST implementation and the economy.
View Vancouver homes for sale.