Phew! What a year it’s been for Vancouver and BC real estate stories. From soaring values, to shadow flipping, to foreign buyers tax, to tough new mortgage policies and then Donald Trump’s US presidential election win… 2016 has seen it all. Here are the highlights of our local year in real estate.
January real estate news is always dominated by the New Year’s BC Assessment figures, which shocked everyone in January 2016. The value of residential real estate in Vancouver compared with the previous year went up by 16.96 per cent – far greater than the already-high 9.5 per cent of the previous year but only the fourth steepest increase in BC, according to BC Assessment figures released January 4. Lions Bay in West Vancouver saw the province’s highest rise, at 17.96 per cent year over year, followed by Squamish at 17.33 per cent and Burnaby at 17.07 per cent. However, the most expensive properties in the province were to be found on Vancouver’s West Side – check out this separate story here about the 2016 roll's top-valued homes (but first, take a guess whose house made the list again…).
In other January news, Royal LePage came out with its annual outlook, predicting that home prices in Vancouver would rise another nine per cent across 2016. The ensuing super-hot spring market, combined with the summer and fall’s drop in sales and detached-home prices, means that this prediction could turn out to be fairly accurate – albeit not necessarily for the expected reasons.
The big real estate story of February was the unethical application of contract assignments to deliberately inflate home prices – now known as “shadow flipping” – which started with this Globe and Mail story and spawned many further media articles, including this advice-based editorial. The issue was later tackled by the provincial government – see March and May.
Also rocking the real estate world in February was the BC Budget, which sidelined first-time buyers in favour of subsidizing buyers of new homes – much to the consternation of many. And first-time buyers were also shocked by the increase in the minimum down payment for homes above $500,000, which was implemented February 15.
Following February’s shadow flipping stories, in March the BC government announced new provincial rules intended to remove the potential profit of contract assignments from real estate agent’s hands. Many in the industry supported the move, but the Real Estate Board of Greater Vancouver’s then-president wrote in a March 22 letter to Premier Christy Clark that the BC government was reacting prematurely, and was particularly scathing of how the local mainstream media had covered the topic. “The media has not let facts get in the way of painting a negative picture of REALTORS® in this story of assignments,” wrote Darcy McLeod.
Meanwhile, the spring real estate market in BC was accelerating at a “breakneck pace,” according to the British Columbia Real Estate Association – and March would turn out to be the hottest month of the year for Greater Vancouver home sales, and the busiest on record of any year.
A City of Vancouver-commissioned report published in March revealed that Vancouver’s home vacancy rate was less than five per cent, which is said to be typical for a city of Vancouver’s size and type, and is lower than the previous study in 2002. However, the 10,800 empty homes identified in the study would turn out to be 10,800 too many for Mayor Gregor Robertson – see June.
With the real estate market in Vancouver at scorching levels, Central 1 Credit Union issued an April forecast that predicted Vancouver and BC home price rises would continue through to 2018. Considering the just-published record-breaking March resale statistics, the forecast was hardly surprising – although of course the credit union did not see coming the ensuing drop in sales and various government interventions that would add to the slowing of an already-topped-off market.
Hoping to offset the market frenzy, the City of Vancouver approved in April the next steps for its new Affordable Home Ownership program, which hopes to initially supply 300 below-market-priced units to eligible middle-income, working Vancouver residents.
In a further step to quell the flames of the shadow-flipping debacle, the BC government announced on May 16 the strict new rules on the application of contract assignments that it had promised back in March. The new system prompted a mix of reactions ranging from support to outrage – this editorial being one of those reactions.
Another major meme in May was a series of media stories on the perceived exodus of Millennials from Vancouver over the lack of affordable housing – which was responded to by this VanCity survey of 500 local Millennials that suggested this was far from the truth.
Reacting to March’s vacant home study, Mayor Gregor Robertson announced in June that 10,800 empty homes was unacceptable and that he would be implementing a vacant home tax “with or without” the province’s backing.
And following the "shadow-flipping" debacle and the new rules on contract assignments in May, the government took away the real estate industry's self regulation, going further than its Independent Advisory Group's recommendations and announcing that the Real Estate Council of BC would be overhauled and governed by a new superintendent.
June also saw two federal early-warning red flags about Canada’s housing market. First, federal finance minister Bill Morneau promised to conduct a “deep dive” into solutions to cool expensive housing markets – this just a few months before introducing strict new mortgage rules that make it harder for lower-income buyers to qualify for a mortgage – see October. The next day, the Bank of Canada governor also issued a warning that Vancouver’s housing market was vulnerable to a downturn and that buyers should conduct themselves accordingly.
Our most-read story in July was this expectation-adjusting advice piece by local agent Lindsie Tomlinson about how the record high prices are causing some sellers to “lose their grip on reality” in terms of what they can expect to sell their homes for.
But of course the big news of July came right at the end of the month, when the BC government did a full 180-degree turn and announced that a new foreign buyer tax, amounting to an additional 15 per cent in property transfer tax, would be imposed in early August. As we all know, it left the real estate industry scrambling to try to get as many overseas-buyer transactions through before the August 2 deadline as possible.
It was all foreign buyer tax, all the time, in August 2016. The new tax was implemented the day after the BC Day stat holiday, and immediately real estate agents started reporting deals collapsing under its weight, which was our most-read story of 2016. There were also a large number of sorry tales of collateral damage of those buyers who had already committed to a purchase and were suddenly hit with the new tax,. Our story on collateral damage prompted a US family who had relocated to Langley to get in touch with REW.ca and share their own tale of woe.
Early August sales statistics suggested that Vancouver home sales were down 63 per cent year over year, although local agents pointed out that this was a combination of August sales being urgently pushed through at the end of July and a widespread “emotional reaction” to the new policy.
Following the above-mentioned foreign buyer tax introduction, everyone was eager to see the board’s MLS® resale statistics for August, issued early September. They revealed that although home sales were indeed well down in August, the drop was nowhere near the 63 per cent that early-August data had suggested – and in fact the rate of sales slowdown was less steep than in June or July, as the market had been rapidly cooling even before the new tax announcement. The chief economist at Central 1 Credit Union was particularly bullish about market recovery, telling an industry audience that he expected Vancouver home prices to be higher in a year’s time than currently.
Still, the collateral-damage victims of the tax would not be quieted, launching a class-action lawsuit September 19 against the BC government for damages incurred.
Another policy-shocker in October, this one in the form of strict new mortgage qualification rules for all Canadians, issued by the federal finance minister (he of the red-flag warning back in June). Bill Morneau announced that anyone applying for a new insured mortgage on a home, those with less than 20 per cent down payment, would have to undergo a “stress test” by qualifying for the mortgage under much higher hypothetical rates, to ensure they could afford a rate increase. This prompted a lot of criticism as first-time and low-income buyers would be the most affected by this policy, which could push many of them out of the reach of home ownership entirely.
The forecasters offered equally bearish news in October, with the National Bank predicting a home price drop of 10 per cent following the recent slew of housing policy changes, and Royal LePage’s third-quarter outlook saying that Vancouver prices had seen their “final hurrah” – at least for this real estate cycle.
If all of the above wasn’t enough, early November saw the shocking victory of Donald Trump’s US presidential campaign. Immediately, Americans who had been threatening to move to Canada, should Trump win, seemed to be making good on their threats, with Lower Mainland home searches from US sources tripling the day after the election. We also published this opinion piece by Western Investor editor Frank O’Brien on the possible effects of a Trump White House on local and US real estate.
In other news, it was reported in November that new home sales seemed to be falling just as fast as resales, according to this Urban Development Institute report, and the CMHC reported that rental vacancy rates had dropped even further in Vancouver, especially in investor-held condos.
In early December, a City of Vancouver poll found – fairly unsurprisingly – that Vancouverites were largely opposed to the proposed 3.4 per cent hike in property tax, which is well above inflation. This was followed by a last-minute proposal to add an extra 0.5 per cent to that raise, in order to create a $3.5 million fund to help solve the fentanyl crisis sweeping the city (and, indeed, country). That total of a 3.9 per cent increase in property tax was approved in a (non-unanimous) council vote December 13, putting Vancouver home owners firmly on the hook for the opioid epidemic.
But even bigger news in mid-December was that Premier Christy Clark announced a new loan program to match first-time home buyers' down payments up to five per cent of the home's value. This move was received with extremely mixed reactions from the real estate industry and local economists, and some confusion from buyers themselves, which this editorial aims to address.