Rudy Nielsen, Landcor Data Corporation
Exerpt from “The Landcor Report – Q2 2012 Sales Summary,” a no-holds-barred analysis of new, MLS® and private home sales throughout BC. And there’s lots more good reading in the full report.
Royal Bank of Canada senior economist Robert Hogue recently reported that the frenzied Toronto condo market isn’t a bubble; at worst, a soft landing ahead, so rest easier, markets such as Metro Vancouver.
Right on RBC’s heels, Capital Economics economist David Madani released his own report which differed with his former employer, RBC. Madani notes when a real-estate bubble is about to burst, there’s a “standoff period” where would-be buyers balk, refuse to meet the swollen prices wanted by would-be sellers who in turn, refuse to trim their own great expectations.
Placed against “an increasingly disappointing macroeconomic backdrop” and localized travails such as upticks in mortgage rates, reduced amortization rates, income losses and so on, and the motivation to sell, speeds up, becomes self-fulfilling.
Here in Canada, with mortgage rates at near-historic lows, home prices reached historic highs, trembled and are now slightly sliding; Madani believes that the market cooling is misinterpreted as a “successful soft landing” and that’s wrong. He believes there’s a real slump and bump in the offing, predicting average prices nationwide to fall by 25 percent over the next few years.
As year-over-year figures flatten, Madani says typically there’s a five- to nine-month pause before circumstances force average sellers to lower prices, raise the white flags even as buyers hold off, betting on even lower prices. And so the stall curves downward. Still, a 25-percent crunch? In Metro Vancouver? Impossible?
Interestingly, although Realtors bravely dismiss it as the typical “summer lull,” residential property sales in Metro Vancouver are cooling. The Real Estate Board of Greater Vancouver (REBGV) reports that July posted 2,098 monthly home sales of all ilk and what represents an 18.4-percent drop, year-over-year. It’s also the worst July result since 2000 and, when set against the 10-year average of 3,051 sold signs in Julys past, July 2012 is off by more than 31 percent.
The REBGV reports 4,082 new listings added in July, the smallest addition posted in 2012 so far and what is a 14.5-percent drop from June 2012 and a 5.8-percent slippage year-over-year. Meanwhile, the “please, buy me” pot grew, with total active listings up 18.8 percent year-over-year and up 2.2 percent from June to 18,081 units total.
In July and for apartment product, year-over-year sales were down by almost 11 percent, although the benchmark price of $374,300 remained unchanged.
Detached home sales were off substantially, down more than 28 percent y-o-y, even though the benchmark price for detached increased 1.4 percent to $950,200 when compared year over year, July 2011 to July 2012.
However (and here’s where aforementioned Capital Economics’ David Madani smiles), the holy grail of Metro Vancouverites — the fabled detached home — actually shed 1.2 percent of its value vis-à-vis its $960,600 or so average figure in June. Sure, the “loss” of $11,000 plus change is a relatively small deal… but go tell that to homeowners who have been banking, literally, on ever-rising home values and the expectation of cashing out, someday, and retiring as multi-millionaires.
Fine plan, but guess what? Markets wait for no one. Markets change.
Okay, now the numbers…
On the previous-quarter-over-current-quarter comparison, the overall BC real estate market appears quite robust, with sales up almost 49 percent or from 18,206 sales in Q1/12 to 27,101 in Q2/12 with values tap-dancing along, up more than 51 percent, from $9.06 billion to $13.76 billion. All other quarterly numbers, positive, save for single-family detached (SFD) product which, province-wide, was down in median and average values by a little over two and 2.2 percent respectively.
However, when “robust” Q2/12 is put up against the year-over-year figures, the positives all turn negative. Total sales, values, average and median prices across the province and across the product range, have all cooled, most significantly in the sacrosanct SFD arena, average and median values down eight percent plus, deeper than attached and condo product.
More interesting is what could be a trending shift in the sales and values posted by the Metro Vancouver market vis-à-vis the “rest” of British Columbia. In the latest quarter and y-o-y, the non-Metro markets have whittled into BC’s prime urban market. In Q1/12, Metro Vancouver accounted for 50.1 percent of the total BC sales market, 66.9 of the value. In the latest quarter, Metro Van came in at 46.2 and 64.6 percent respectively. A year ago, the comparables were 52.3 and 71.4 percent respectively.
Is Metro Vancouver slipping? The regional figures might provide some indicators, if not traction: Within itself, Metro Vancouver mirrors the overall BC market: the latest quarterly comparison is all positive: Q2/12 is up over Q1/12. However, on the y-o-y roster, it reverses, all negative. Volume and values are in flux with SFD showing signs of topping out.
Over on Vancouver Island and largely driven by the Capital Regional District, it’s much the same. Up on the quarter, down on the yearly comparable.
Step beyond the Big Two (sorry, Kelowna; someone has to be third) and the “on, off” situation shifts markedly, some regions more marked than others. In the Kootenays and although SFD and attached are somewhat off y-o-y, condo product is doing well, even as the number and value of sales are up an impressive 76.3 and 85.3 percent respectively.
In the Okanagan arena and although the quarterly bump versus y-o-y dip is similar to Metro Vancouver and Vancouver Island, the number and value of sales stand on their own, positive y-o-y and especially so in the last quarter: up 78.5 and 84.5 percent. Ditto for the Fraser Valley with condo and attached product posting very modest slips, with sales and values motoring along, albeit as a more sedate 42.1 and 49.2 percent.
Least but far from last, and although BC North/NW is diffuse in terms of people, the region is rapidly filling up, ignited by ongoing and proposed energy projects, pipelines and other resource-based industries. Incoming bodies need bedrooms and the region is buying and building up impressively. Although the number and value of sales are about a sixth the size of concentrated Metro Vancouver, with BC North sales jumping by almost 90 percent or from 1,312 units to 2,487 units quarterly and total value more than doubling, up 107.5 percent or from $237 million to almost half a billion, the north is jumping. Interestingly, of all the regions reporting in, the BC North/NW is the only one without a single “negative blemish” on its sheet, quarterly and y-o-y.
Go north, young Realtor, go north (bring bug spray and woolies).
Read the full report, complete with charts.
Landcor Data Corporation is an independent research firm with the largest, most comprehensive database on BC real estate, provided by the BC Government. Landcor draws on a wide range of other data, and on almost 25 years of deep analysis of the real estate market.
