Vancouver Housing Bubble Burst Sends Local Consumer Sentiment Crashing Most In Three Years

As was largely expected, the first official data since the bursting of the Vancouver housing bubble following the 15% luxury real estate tax, was ugly: on one hand, the number of Vancouver home sales fell 26% from a year earlier, and tumbled by 23% comparted to July, to 2,489 transactions. Detached properties were hit hardest as sales dropped 45% from a year earlier. Transactions of attached homes such as town-houses dipped 25% and apartment sales were down 10%. On the other, prices likewise slumped, with the average price of detached Vancouver properties crashing 17% in just one month, and already down 0.6% on the year, to C$1.47 million ($1.13 million) in August, the lowest price since September 2015.

 

What is worse, is that what was until now a mostly regional housing bubble, is starting to spread in the form of a hit to Canadian consumer confidence. As Bloomberg reports, "a shifting real estate market in Vancouver led Canada’s consumer confidence index lower for a second week." According to the BBG Nanos telephone poll shows, the share of respondents who see local real estate prices falling has almost doubled in the last two weeks, rising to 22.5% in the latest survey, up from previous readings of 20.5% and 12%. Conversely, the share of those who see higher prices fell to below 40 percent for the first time since April.

Housing jitters dragged the broader Bloomberg Nanos Canadian Confidence Index down to 58.4, from 59.3 previously, the second straight drop from the 2016 high of 59.9. Readings on the economy also deteriorated, while perceptions of job security and personal finances showed slight improvements.

The drop may not appear too dramatic on the chart below, however once the inlfection point in public mood hits, the acceleration phase kicks in shortly after, especially if the Vancouver housing woes accelerate or, worse, spread to cities such as Toronto.

However, while the broader national index has only just started inflecting, the British Columbia expectations sub-index, which measures the outlook for housing and the economy, plunged by the most since July 2013 to 60.9. 


“Negative pressure on the perceptions of real estate value continues, particularly in the province of British Columbia,” said Nanos Research Group Chairman Nik Nanos.

Unless another wave of price-indescriminate Chinese buyers emerges over the next few months, what is for now just a trickle to national Canadian consumer sentiment, will promptly become a flood.

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