Vancouver Real Estate Market Hits Absurd Levels
Even if you don’t care about real estate at all, you likely have heard about the giant bubble in Vancouver’s real estate market. But just how big is the housing bubble? Well, let’s take a look at some data.
According to the monthly statistics report from the Real Estate Board of Greater Vancouver, if you were to buy a detached house in Metro Vancouver in April, you would face a staggering benchmark price of CA$1.4 million. (Source: “Home Sales Remain at Record Levels Across Metro Vancouver,” Real Estate Board of Greater Vancouver, May 3, 2016.)
For that kind of money, don’t think for one second that you are getting a mansion. The benchmark price represents the price of a typical property within Metro Vancouver.
What’s more astonishing is the size of the price increase since last year. Over the past decade or so, detached houses have already gotten super expensive in Vancouver. And yet the benchmark price of CA$1.4 million represented a whopping 30.1% increase year-over-year.
A look at the number of properties listed for sale might shed some light on the forces behind the red-hot Vancouver real estate market. In April, the total number of properties listed for sale on the MLS (multiple listing service) system in the area turned out to be 7,550, a 39.3% decline compared to April 2015.
When demand is going strong and supply is actually shrinking, it’s no wonder prices are going up.
However, the number of properties listed for sale in April did increase by a mild 2.6% sequentially.
The board said that “while we’re seeing more homes listed for sale in recent months, supply is still chasing this unprecedented surge of demand in our marketplace.” (Source: Ibid.)
Other than detached properties—the most sought after kind in today’s market—other types of residential properties enjoyed substantial price increases as well.
The price of a benchmark apartment property surged 20.6% year-over-year to CA$475,000. The benchmark price of an attached unit also rose 22.1% to CA$608,600.
The red-hot real estate market in Vancouver helped to drive Canada’s housing market to new highs. According to the Canadian Real Estate Association (CREA), the national average price for homes sold in April increased 13.1% year-over-year to CA$508,097. (Source: “Canadian Home Sales Set Record in April,” The Canadian Real Estate Association, May 16, 2016.)
A substantial part of the increase in the national average price was due to Toronto and Vancouver. If you exclude those two markets, you’d see that the national average price drop to CA$369,222 and the year-over-year gain fall to 8.7%.
On the monetary policy front, the Bank of Canada hasn’t really done much to cool down the housing bubble. Last year, there were two rate cuts. Now, it’s actually keeping a negative interest rate policy (NIRP) as a tool on the table. Going forward, prices might climb even higher in Canada’s real estate market.