BCBusiness

T he real estate boom gripping B.C., and the city of Vancouver in particular, has been historic on nearly all fronts. The frenzy to snatch up Vancouver soil kicked o in 2013. Bidding wars for detached homes spread like wild•re, pushing sales to a record in 2015, along with dollar volumes, which hit $8.9 billion that year, accord- ing to the Real Estate Board of Greater Vancouver. The average sale price of a detached home in the province's largest city surged 48 percent from 2014 to 2016, reaching an all- time high of $2,825,858. In response to public angst about runaway housing costs, policymakers at all levels dog-piled onto the real estate market, announcing a foreign buyers tax, two mortgage stress tests and a hike in the property transfer tax, to name a few measures. Meanwhile, the Chinese government took swift action to curb capital outŒows, requiring citizens to pledge that they wouldn't use cash leaving the country to buy property. OutŒows from China plunged 67 percent last year, according to investment •rm Pictet Wealth Management. As a result, multiple oers vanished and speculative activ- ity dried up, leaving would-be house Œippers facing a liquidity crunch. Many sellers remain willfully optimistic about a rebound in 2018, but it hasn't been the start they were hop- ing for. In the •rst quarter, Vancouver detached home sales fell to their lowest for that period in more than 27 years. Increased taxation has pushed foreign bids to the sidelines, with a $3-million purchase now requiring those buyers to cough up $668,000 in levies upon closing. Local purchasers have been stymied by rising mortgage costs and tougher qualifying rules. A typical Vancouver household with an aver- age mortgage would have to part with an additional 9 percent of its income to service a 1-percent rise in interest rates, the National Bank of Canada estimates. With rates expected to keep inching upward in 2018 and the provincial government intent on curbing house prices, a quick rebound in Vancouver's detached home market could be a fading pipe dream. Now it's become apparent that banks have started pricing in addi- tional risk, raising borrowing rates and getting more selective about who quali•es for a loan. Homeowners hoping to renew their mortgages are also at the mercy of their current creditors following new B™20 mortgage guidelines that require bor- rowers to face a stress test if they want to switch. This allows lenders to squeeze them when it comes time for renewal, especially if credit conditions continue to erode. Such headwinds leave the B.C. economy, especially its real estate and construction industry, in a vulnerable posi- tion. The sector now comprises almost 25 percent of provincial GDP, Statistics Canada esti- mates. With some 55,000 hous- ing units under construction, nearly double the long-term average, it's been •ring on all cylinders. Unless you're hoping for a crash, it could be time to think about taking shelter. house arrest As Vancouver's detached home market grinds to a screeching halt, could the provincial economy follow? by Steve Saretsky ( the informer ) 20% ➡ By the end of 2017, Vancouver detached home sales had fallen Sales for the year clocked in at the lowest number since 2008 2,434, In 2017 the average sale price of a Vancouver detached home slid 6.5% Detached homes being flipped, or bought and resold within 24 months, fell to a 10-year low Total dollar volume sank to $6.4 billion, a 25-percent year-over-year decline Low Blow in the first quarter of 2018, sales of detached Vancouver homes made their weakest year-over-year showing in almost three decades 200 400 600 800 1,000 1,200 1,400 1,600 1,800 1990 1995 2000 2005 2010 2015 0 720 619 892 1,551 1,246 992 533 1,128 562 1,040 352 1,304 1,390 1,707 JUNE 2018 BCBusiness 21 sOuRCEs: REal EstatE bOaRd OF gREatER VanCOuVER; stEVE saREtsky R E A L E STAT E

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