Vancouver Home Sales Crash 30%, Drop To Lowest In 18 Years

What happens when prices rise so high that a chasm forms between bids and asks? The market grinds to a halt.

That's what happened in Vancouver housing in July, when according to the Real Estate Board of Vancouver (REBGV), residential property sales tumbled by 14.6% from June 2018, and a whopping 30.1% from one year ago. In fact, a total of only 2,070 transactions took place which was the fewest since the year 2000, as both buyers and sellers continue to sit on their hands amid confusion whether the recent price gains will continue or whether the housing bubble has burst.

Sales of detached properties in July was just 637, a decrease of 32.9% from the 949 recorded in July 2017, and the 1,079 apartment sold was a 26.5% drop compared compared to the 1,468 sales in July 2017.

And no, it's not seasonal: last month’s sales were 29.3% below the 10-year July sales average.

The reason for the collapse in transactions: the formerly all too willing buyers, mostly Chinese oligarchs who would use Vancouver real estate as their offshore Swiss bank account, have disappeared.

"With fewer buyers active in today’s market, we’re seeing less upward pressure on home prices across the region," Phil Moore, REBGV president said. "This is most pronounced in the detached home market, but demand in the townhome and apartment markets is also relenting from the more frenetic pace experienced over the last few years."

"Summer is traditionally a quieter time of year in real estate. This is particularly true this year," Moore added,

Curiously, despite the slowdown in the market, prices remained at nosebleed levels, suggesting that sellers are not in a rush to sell. Detached homes sold for an average of C$1.59 million, down 1.6% from a year ago, and apartments averaged C$700,055, up 13.6% from July 2017. The overall composite benchmark price fell just 0.6% in July to C$1.09 million, which is still up 6.7% from a year earlier, and remains unreachable for most ordinary buyers.

The report signals buyers are still adjusting to tougher mortgage qualification rules the federal government introduced Jan. 1, and more worryingly, to the four increases in the Bank of Canada’s trend-setting interest rate over the past year. Those rules were put in place after surging prices in both Toronto and the Pacific coast city led to warnings about excessive speculation.

"With increased mortgage rates and stricter lending requirements, buyers and sellers are opting to take a wait-and-see approach for the time being", Moore said.

Other levels of government have also cracked down. British Columbia’s provincial government imposed a tax on foreign buyers, and Vancouver is trying to deter property speculators with a levy on vacant homes.

So will prices catch up to the collapse in sales? According to the REBGV, for all property types, the sales-to-active listings ratio for July 2018 is 17.1%. By property type, the ratio is 9.9% for detached homes, 20.2 per cent for townhomes, and 27.3 per cent for condominiums.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below the 12% mark for a sustained period, while home prices often experience upward pressure when it surpasses 20% over several months.

In other words, with the surge in detached listings coupled with the lack of declining prices, all that Vancouver's real estate market needs is a spark that launches the selling deluge; however since the bulk of purchases were made "all cash", and in most cases sight unseen, it is unlikely that further monetary tightening will be the catalyst that finally pops one of the world's biggest housing bubbles.

Comments

karenm Thu, 08/02/2018 - 19:07 Permalink

I live nearby. It's a fucking disaster. Worse than the article says, cause house sales(not condos)are the lowest ever....ever.

At the same time, dumbfuck builders are building more of everything than ever in history. No exaggeration, they're batshit crazy building into the perfect storm.

karenm Herd Redirecti… Thu, 08/02/2018 - 20:32 Permalink

@Herd redirected

 

"Sellers market"

 

LMAO!! Sellers can't sell a damn thing. Wow, I see the delusion is thick here, must be a lot or Vancouver of BC people stressed about losing thei jobs. Well guys, you ARE going to lose your job and very soon. As soon as your employer realizes he cannot make interest payments on houses that aren't selling.

 

THat day, you will get called in to your manager's office for "A meeting."

 

In reply to by Herd Redirecti…

lock-stick Free This Sat, 08/04/2018 - 01:58 Permalink

ONE whackjob obsessed SPAMMER -- with numerous log-ons!!!

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spamming ZH for seven years --- dozens and dozens of banned log-ons

 

ONE DEEPLY DISTURBED INDIVIDUAL 

 

Write to the Tylers ::  abuse@zerohedge.com

In reply to by Free This

Superlat Herd Redirecti… Fri, 08/03/2018 - 01:10 Permalink

In Seattle, somebody, be it Berkshire, or a Chinese trust, or someone else, has dumped a lot of houses on the market. Someone's getting out. Prices are definitely dropping, granted, from 100% appreciation in 4 years, and from prices set too high, but prices are dropping.

Homes are still selling as well, but Seattle is not Vancouver in terms of prices. The Canadian currency is also down 30% since oil tanked 3 years back, so obviously that's a factor I suppose.

In reply to by Herd Redirecti…

robertocarlos karenm Thu, 08/02/2018 - 19:14 Permalink

Did you read today's Globe? Shaughnessy house cost $3 million to build and 800k for the land in 2008 but only sold now for $4.5 million. That seems a steal of a deal.

Edit: Sorry that house sold for $4.5 in 2010. It's worth $15 million now! The owners should sell and move back to China.

In reply to by karenm

Lore pitz Thu, 08/02/2018 - 20:12 Permalink

Exactly. The "Chinese capital" meme is a relatively minor factor, sufficiently distracting (apparently) that it prevents ZHers from seeing bigger factors like stagflation, monetary policy, loose credit, industry and regulator corruption, and SPECULATION. 

(It's like the people who blame Venezuela's woes solely on some vague concept of "socialism."  Get PAST it...) 

CBC documentary: THE CONDO GAME

Thousands upon thousands of overpriced, shoddy, empty units are being traded like baseball cards, while builders continue to throw up more like there’s no tomorrow, exploiting government subsidies and documentation loopholes, rationalized by "densification" and "affordability" (entitlement) narratives.  The lack of vision is stunning.  It won't end well. 

...And for stating what should be obvious, I get downvoted. Facepalm.

In reply to by pitz

PrintCash karenm Thu, 08/02/2018 - 19:34 Permalink

“It’s a fucking disaster.....”.  Uh, nope, it’s simply inevitable.  Did you think your vote-induced bubble wouldn’t pop?!?!?  Have people forgotten what happened 10 years ago?!?!?  Evidently.  The short sightedness of our culture is absolutely mind boggling.

In reply to by karenm

Bushogboner HedgedCanuck Thu, 08/02/2018 - 20:32 Permalink

Has to be sarc. I saw that first wave of hot HK money come in in '89. House prices doubled instantly. Once the commie mayor Harcourt sold off 30% of downtown Van for peanuts to LiKaShing, the gates were opened for the Chinese. I'm not saying it was a bad thing; for years Vancouver had been whoring to be "world class" whatever that meant. You reap what you have sown Hongcouver.

In reply to by HedgedCanuck

yerfej Thu, 08/02/2018 - 19:14 Permalink

The best thing would be for the federal government to step in and help out those who invested in keeping the economy growing. The citizens who have bought homes should have the govenrment guarantee them a sales prices so no one needs to be negatively impacted by the markets. It only seems fair.