The year that was
The end of the year is quickly approaching, and before everyone scurries away for the holidays, we thought it would be worthwhile to take stock of all that was in Greater Vancouver's real estate market over the past year. In other words, what can we glean from 2018?
1. Nothing lasts forever. Overall, sellers’ market conditions— defined by a sales-to-listings ratio (greater than 21%) that puts upward pressure in prices—had prevailed throughout the Greater Vancouver board area from February 2015 through all of 2016 and 2017, abating only in May 2018. For townhomes, these conditions spanned April 2014 to June 2018 and for condos, from March 2015 to August 2018. During these heady times for sellers, year-over-year benchmark prices increased by an average of 18% for condos and by 14% for townhomes, compared to an average of 1.3% and 0.5% in the preceding years that were characterized by balanced conditions. These more recent price increases were never going to be sustainable over the long-run, with the year-over-year increases of 2% (for condos) and 3% (for townhomes) seen in November 2018 marking a return to a much more normalized multifamily market.
2. Markets work. Home sale prices—whether defined as benchmark, average, or median—stopped increasing or even began to slightly decline on a month-over-month basis in 2018 due to the changing dynamic between supply and demand. Indeed, year-over-year demand (sales) was down by 42% overall in November 2018, while supply (inventory) was up by 30%. Put more simply, buyers now have more choices, face less competition, and are more discerning in making their purchase decisions, and this is being reflected in prices.
3. Conditions are a challenge for some, a welcome change for others. Whatever the state of the market, there are those that are in a position of strength and those that are not. For the three years leading up to 2018, it was sellers who held most of the cards, with many buyers (existing owners and first-time buyers alike) seeing their purchase efforts thwarted in scenarios characterized by multiple offers that were subject-free and above asking price. Today, many sellers are being forced to price their homes more reasonably, wait longer for the right suitor, and then negotiate and (often) settle for less than their original asking price.
4. Uncertainty is anathema to a balanced market. A good part of the transformation the market has undergone in 2018 has been welcome—for example, balanced conditions and more sustainable price changes—reflecting changes in underlying fundamentals. Having said that, recently-introduced demand-suppressing policies and regulations have created an element of uncertainty for buyers, sellers, developers, financers, and others. To the extent that there remains policy-centric unease, the market may see conditions deteriorate to disequilibrium levels. However, in the absence of new market interventions, improved sentiment should foster healthy conditions in 2019.
The rennie review is produced each month by rennie intelligence, which includes the latest real estate data for Vancouver and the Lower Mainland's housing market. View the latest edition of the rennie review.
Our rennie intelligence division empowers individuals, organizations, and institutions with data-driven market insight and analysis. Experts in urban land economics, community planning, shifting demographics, and real estate trends, their strategic research supports a comprehensive advisory service offering and forms the basis of frequent reports and public presentations. Their thoughtful and objective approach truly embodies the core values of rennie.