Thanks to last year’s heavy government interference in the real estate market, we hit all-time lows in August 2016. Foreign homebuyers tax provincially, the vacant home tax locally and the revised and more stringent loan regulations federally caused a significant drop in pricing in our market last year. In many cases as much as a 15% drop in pricing across Vancouver. Through Fall we experienced some moderate price recovery mainly due to the lack of product on the market.
From the onset of our market in 2017 we have experienced a great shortage of product across all levels of our market and increased demand. As a result prices have continued their gradual recovery.
Consumer confidence has returned for a number of reasons. Firstly, bank and mortgage specialists have figured out the new loan regulations and are more confidently approving clients. Secondly, there is a significant number of buyers who did not buy last year and followed the market on its downward decline who have now jumped back into the market taking advantage of current pricing so the pent-up demand from last year is letting loose. And thirdly, the entry level segment of our market in condos, town homes and half duplexes has become extremely hot allowing sellers in that market to upgrade to higher more expensive detached product. When the entry portion of our market becomes active it feeds the upper end detached market eventually.
The interesting thing we are experiencing currently is incredible market compression in pricing. In plain English, this means that upgrade buyers are in a very unique window to jump from entry and middle end product into more expensive detached housing. There’s never been a better window to do this than right now so upgrade buyers are benefitting greatly in this market.
As these buyers feed into the upper end of our market, the current market compression will begin to unravel and prices in houses will start to take off. And this will happen rather quickly. As prices climb in the detached market, many downsizers will also take advantage of this window while the demand for their homes is high.
The catalyst in our market decompressing will be the onslaught of houses hitting the market. This usually takes place in March / April. It’s complicated to follow precisely unless you’re doing it every day like us. But our Real Estate Timing Analysis which we cover in detail with every client that we meet with has become an invaluable tool in precisely targeting the perfect times to hit the market for a sale or a purchase depending on the specific product in question. The graph below shows the annual cycle of activity throughout the year, clearly defining our spring and fall peak market activity periods.
Despite negative forecasting in the media about our Vancouver market, I believe we are going to see an excellent year of market recovery and appreciation in all segments of our market. Canada and specifically Vancouver will continue to be targeted as one of the destination cities to live in, invest in, and enjoy the benefits.