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Vancouver’s Turbulent Housing Market

vancouver real estate

Analysing the on-going hurly-burly situation of Vancouver’s real estate market, it can be predicted that the cluster of black clouds that has jam-packed the sky of the city will not permit the sky to become clearer and sun to rise anytime soon.

The incessant anger, frustration and rage of Vancouverites towards the housing market of the city have led to some intense situations. From the rise in prices to a shortage in supply of houses and from 15% tax imposition on foreign nationals to the abolishment of the foreign buyer tax on people with work permits, folks have seen it all; and believe it or not, this has given rise to a blame-game.

The Blame-Game

When the first-time buyers were priced out of the real estate market, it gave rise to an array of emotions, strong reactions and never-ending blame-game. The foreigners, the speculators, the real estate agents, Christy Clark, the rich and the poor, all have been blamed for the out-of-control Vancouver housing market.

But out of all, one aspect that has got overlooked in the debate is that the house owners in Canada are the most tax subsidised payers.

Tax Programs to Evenly Distribute British Columbia’s Wealth

The tax program that we’re going to discuss first is the Home Owner Grant. The Home Owner Grant enables the homeowners in Metro Vancouver to base their decision of whether to sell or not sell their real estate properties.

Every year in January a huge wonder game takes place that questions how much B.C. will change the exemption to.

The taxpayer of B.C. pays some of its residents an amount of $570 towards their property taxes every year, but in the case of an unsubsidised market, the house owners might be persuaded to sell their properties. In a housing market where the shortage of supply is often argued as a reason for mountain climbing prices, the B.C. government lays down an unwarranted restraint on the housing market’s original supply of listings with Home Owner Grant.

The next tax program is the property-tax deferral program. This is the only program where when a person turns 55, he/she can apply to have all of their property-tax delayed until the time they sell their home. When one has applied for the program, the B.C. government pays the taxes for the applied and charges a relatively low-interest rate of 0.7% for the benefit.

This way, it would become mandatory for some house owners to sell off their real estate properties, similar to how it is in other housing markets around the world. It is held that downscaling or losing your house is in a way a natural order of a free, housing market and presently the province’s government energetically interferes with this happening.

Further, it has been predicted that during the coming financial year, the Home Owner Grant will cost $857 million to B.C. taxpayers.

In the month of January, Christy Clark’s government presented two taxpayer-funded programs into the housing market – the B.C. Home Owner Mortgage and Equity Partnership. With this, it becomes every individual’s financial concern to possess their primary house at the very least. These programs will cost B.C. taxpayers $728 million during the coming three years. It is further expected that the program would add 1,400 buyers to the B.C. housing market in the future years.

Thus, the government subsidises the housing market around $1.25 billion every year. The two programs impact supply by providing an incentive not to sell their properties, and the other creates demand by motivating individuals to purchase.

The only way to calm the uncontrollable housing market is to put a halt on subsidising homeowners with these financial incentives in order to increase the supply for sale.

Property tax deferral program
Number of Property Tax Deferrals has increased year by year. Source: Metro News

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The Story of the Last Month – Low Supply and Tumbling Sales

Justin trudeau in Vancouver
Justin trudeau in Vancouver

The month of February has limited days and so was the housing supply and home sales across Vancouver in the month – Limited! What a coincidence!

The residential sales in Vancouver dropped dramatically in February 2017 juxtaposed to last year’s record-breaking leap. According to The Real Estate Board of Greater Vancouver, the reason for such a low housing sale is a limitation in the supply of listings and an abnormally snowy start to the year that had an effect on the Vancouver housing market.

There were 3,666 new listings in the February month; this is an almost 37 % fall from February 2016 and an 11 percent decline from the month of January. According to the board, this is the lowest number of new listings registered in February since 2003.

condosinyaletown.com
Vancouver listing February 2017 vs February 2016

The Board mentioned that the housing sales amounted to 2,425 in February, which is approximately a 42% drop from the same month last year. Nevertheless, the residential sales went up an almost 59%, compared to the month of January 2017.

The board further shared more information about the market drop in February. It said that the number of housing properties that got transferred in the month was 7.7%, which is just below the 10-year sales average for February.

The President of the Board, Dan Morrison remarked, “If you go to the store and there’s no bread on the shelf, you don’t buy it.” He further said, “While home sales are not happening at the pace we experienced last year, home seller supply is still struggling to keep up with today’s demand. This is why we’ve seen little downward pressure on home prices, particularly in the condominium and townhome markets.”

Morrison indicated that for months individuals had held a “wait and see” approach towards the housing market that had already begin to cool off before the foreign buyer’s tax was announced by the British Columbia government in Metro Vancouver in August 2016.

Although, Morrison has hope for he mentioned that the signs indicating the return of confidence in the Vancouver real estate market have surfaced. The sales-to-active listings ratio in February was 31.9%, a 10 percentage point surge from the first month of 2017.

Greater Vancouver Condo Values Rise & Benchmark Prices for Properties

The price of condos and townhouses in Greater Vancouver is rising despite of the sinking sales. As discussed above, the sales fell to a considerable extent as compared to last year.

The MLS® Home Price Index composite benchmark price is a representation of the cost of a typical property in the city. The present benchmark price in Metro Vancouver is $906,700, low by 2.8% over the previous six months.

The Real Estate Board said that the benchmark price for detached housing properties is $1.47 million. This figure showcases a 6.5 percent drop over the preceding six months, and there has been no change in the numbers compared to January 2017. On the other hand, the benchmark price for condominiums was $526,300. The price has taken a 2.3 jump over the previous six months.

Let’s sign off by using a statement by Tom Davidoff regarding the matter, “Certainly; I don’t think we’re done with the downward pressures. They still exist.”

Now, let’s see how the coming months for Metro Vancouver’s real estate market unfurl.