November Real Estate Update - Detached Decoupling?
“We’ve seen a lot more consistency and less volatility in recent months when it comes to both number of sales and pricing, although it’s important to remember that conditions often vary between communities and neighbourhoods,” - Jake Moldowan, Real Estate Board of Greater Vancouver (REBGV) president.
So what is going on?
One explanation for the detached market's performance might be fixed mortgage rates. Five year fixed rates in October were the lowest they have ever been and this is likely more significant for detached homes. Ironically, the high cost and thus the high mortgage values of detached homes means that low fixed term rates may encourage riskier purchases. We have had extremely low variable rates of late but as an example let's look at a $2m purchase with a $1m mortgage. The risk of a rising interest rate might make this kind of purchase unsettling, seeing as a rise of 2% could add more than $1000/month to the payments. The same $1m mortgage with a fixed interest rate of 3.29% makes the decision much easier - with the certainty that rates won't go up, the purchaser can rest easy. Another explanation could be the continuing influx of Chinese and other foreign money into the Westside market. British Columbia has one of the most attractive 'investor' immigration programs in Canada. For as little as a $200k of investment, an investor can immigrate to British Columbia. With such a low barrier, it is no wonder that the money is flowing and it is flowing to neighbourhoods with so called "top ranked" schools (i.e.: Fraser Institute - whose school rankings I put little stock in). In other words Vancouver West. Vancouver may also have developed a "safe haven" reputation in an otherwise difficult global real estate market. The high prices may actually be creating a positive feedback cycle.
So what does it all mean to me?
Sam Wyatt - Vancouver Realtor