Opinion: Even though Metro Vancouver’s real estate might be down in the minds of many of China’s wealthy, they’ve not abandoned it
Ontario real estate activity has seen an uptick in recent weeks, as consumers and the industry adopt a “new normal,” which includes strict social distancing and the use of personal protective equipment – if you can get your hands on it. RE/MAX Real Estate Centre, which serves Cambridge, Kitchener and surrounding areas, is doing its part to boost the safety of its agents, clients and even its competitors by sharing “safe home showing kits.” Broker and owner Delio Oliveira says he’s already seen in-person showings more than double in recent weeks. “Our safe home showing kits have certainly contributed to this, as our sellers feel more comfortable with a no-contact showing.”
While April 2020 housing data indicates a steep decline in home sales and listings last month, the Canadian Real Estate Association has highlighted preliminary May figures that show activity may already be on the up-swing. Similar trends have been reported in Ontario real estate markets.
“Many clients start with virtual showings and exclude the homes that don’t meet their criteria,” Oliveira says. “The result is that the buyers who engage in in-person viewings are more serious and qualified, because they have narrowed their search substantially with virtual showings. It has made the showing process much more efficient. This will be a continuing trend post-COVID 19.”
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Safe Home Showing Kits
“There is a tremendous awareness of the dangers of not practicing physical distancing, so buyers and sellers feel uneasy to say the least,” Oliveira says. “Since we introduced our safe home showing kits, our clients have felt a lot safer and have really embraced our brokerage as the safe solution. Consumer awareness of these measures is top of mind as we continue to distribute these kits.”
Within three days of launching the initiative in late April, RE/MAX Real Estate Centre distributed nearly 1,000 PPE kits. To date, they have distributed nearly 4,000 of them to agents, clients and competitors.
“I think we are all better for it. We are truly all in this together,” Oliveira says. “We are fortunate to have the resources of a large brokerage with nearly 1,000 agents and 17 locations, so we felt that we needed to share with those who would not have the same opportunities to enhance the safety of their clients. [RE/MAX Real Estate Centre co-owner] David Medeiros and I are extremely proud of our team who have worked tirelessly to facilitate this initiative.”
Oliveira and Medeiros initially provided the PPE kits exclusively to their agents due to very limited supply. Within days, their supply opened up somewhat thanks to their own in-house design, marketing and print shop. In coordination with their own company courier, they were able to provide the artwork, labeling and distribution, and scale this venture to accommodate demand.
Ontario Real Estate Trends
Ontario real estate had a strong start to 2020, with low inventory and high demand creating the perfect storm for rising prices and a seller’s market. Then the pandemic hit and the world changed, leaving homebuyers and sellers wondering whether now is a good time to get into the market. Many took to the sidelines due to job losses and economic uncertainty. Find out how a variety of factors are impacting Ontario real estate prices right now.
Gloomy B.C. real estate forecasts not as bad as some predict: agent – CityNews Vancouver
VANCOUVER (NEWS 1130) — The forecast for buying and selling real estate in B.C. isn’t what it could have been, but it’s not as bad as the double-digit price drops some analysts have predicted, according to a Richmond presale condo and townhouse agent.
Vince Taylor admits he’s biased, but said the facts are not — supply is low in B.C. and interest rates are historically low, so prices will be relatively stable.
“I am expecting a drop-off for sure. I don’t expect the market to rebound in 2020 like it was going to in March, but I see no structural, no macro or micro economic reason for the kinds of drops that have been reported,” he said.
“Tell me how that makes any sense that prices are going to go down when you have the lowest interest rate in 40 years, limited supply, and not that many people actually lost their jobs.”
He adds the COVID-19 cloud is dark, but there is a silver lining, and nothing structurally has changed about the real estate market.
While Canada is seeing the worst GDP numbers in a decade, Taylor said the easing of health and safety restrictions will bring more buyers and lower prices to the market.
The Canada Mortgage and Housing Corp. expects home prices and sales to decline substantially this year and still won’t have recovered by the end of 2022.
The federal housing agency’s special housing market outlook predicts home prices to decline between nine and 18 per cent, and as much as 25 per cent in oil-producing regions, before starting to recover by mid-2021. The report also suggests average home prices in B.C. could drop close to $100,000 this year.
Will real estate prices plunge? That may depend on the sellers – Financial Post
The economic uncertainty surrounding COVID-19 has contributed to contradictory estimates of future housing prices and sales. Leading the bears is the Canada Mortgage Housing Corporation (CMHC), projecting average housing prices to fall by nine to 18 per cent.
Others, including economists at the Canadian Real Estate Association (CREA), are not convinced prices will fall as steeply as the CMHC projects. Many homebuyers and sellers have been left perplexed by these conflicting forecasts — much can go wrong if they rely on the wrong estimates in their buy and sell decisions.
Regardless of the sophistication of algorithms, forecasts are necessarily a byproduct of the assumptions forecasters make and the data they use. Assumptions, inherently, are neither right nor wrong. They are informed guesses about future outcomes. When reviewing a forecast based on modelling, always remember the advice from the famed statistician, George Box: “All models are wrong, but some are useful.”
The CMHC forecasts were generated using “a specific set of assumptions for the market conditions and underlying economic fundamentals,” CMHC noted in the report’s appendix.
But how precise are they? CMHC estimates that average Canadian housing prices in 2020 will be anywhere between $493,200 and $518,400, representing a nine to 18 per cent decline from pre- COVID-19 levels. The number of sales transacting through the Multiple Listing Service is expected to be between 416,000 and 450,500.
The above forecasts are for the average price in Canada. Local market forecasts could be much different. CMHC reported provincial estimates for prices, sales and housing starts, with all provinces seeing the same trend of falling metrics through 2020 and a rebound starting later in 2021.
The lowest average price forecast for British Columbia at $609,515 is still more than double that for Alberta at $288,522. Both numbers are for the second quarter of 2022. The lower bound forecast for Ontario at $531,715 is slated for the second quarter of 2021, which suggests that CMHC expects housing markets to recover sooner in Ontario.
CMHC’s report does not disclose the methods or data used to generate forecasts. The report mentions that CMHC forecasts deploy the “full range of quantitative and qualitative tools currently available.”
The report claims that the forecast’s “range provides a relatively precise guidance to readers on the outlook while recognizing the small random components of the relationship between the housing market and its drivers.” However, the wide range of forecast for prices and sales is indicative of the “high degree of forecast uncertainty” partly due to the “unprecedented nature of the COVID-19 pandemic.” To us, therefore, the claim for precision may be a stretch.
Homebuyers and sellers need to be able to understand what forecasts mean for their decision-making processes. Economists prepare estimates with care. However, when predictions differ from the real outcomes, economists readily revise their projections. Homebuyers and sellers, once they have transacted, cannot “revise” their transactions. Hence the stakes are higher for the ones active in the market.
Another way of thinking about future housing prices is to think about the willingness of sellers to accept lower bids for their listings. If one is of the view that sellers will be, on average, willing to accept bids 18 per cent or more below than what they could have received before March 2020, a significant decrease in housing prices could be inevitable. However, this seems to be an unlikely scenario.
If prices start to decline significantly, sellers can slow or even freeze the market by not listing their properties, withdrawing them from consideration, or refusing a lower bid. Sellers’ unwillingness to sell dwellings at lower-than-expected prices can protect against a freefall in housing prices. Also, when less inventory is available for purchase, buyers may have to compete, which could put upward pressure on prices.
Lastly, the average decline in the average price does not imply that an individual dwelling will experience an average drop in valuation. Why? Because the average price forecasts ignore the differences in sizes and quality of housing or the fact that when economic conditions worsen, higher priced homes stop transacting, and lower-valued homes dominate the sales. The shift in the structural composition of housing gives a false impression that housing prices are falling. Thus, CREA’s estimates of constant quality homes are not as severe as CMHC’s.
Homebuyers and sellers should have a look at the market forecasts. But they should base their decisions on their circumstances and local housing market conditions. Remember, forecasts are useful, but not necessarily accurate.
Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached atwww.hmbulletin.com.
Douglas Todd: China's real-estate investors down on Vancouver, but not out – The Kingston Whig-Standard
Huawei CEO Meng Wenghzou must stay under mansion arrest following this week’s court decision in Vancouver. China’s authorities rage, while continuing to unfairly jail Michael Spavor and Michael Korvig and drastically cut imports of Canadian canola.
Rival ethnic Chinese groups clash in the streets of Vancouver over Beijing’s clampdown on Hong Kongers’ freedoms. COVID-19 kills more than 6,800 across Canada and lockdown virtually ends international travel, sending home many of China’s foreign students, especially from Toronto and Vancouver.
China-Canada relations are at their lowest ebb in decades, particularly according to China’s pervasive regime-backed media outlets, which this week called Canada a “pathetic clown.”
And that has implications for Metro Vancouver’s housing market.
This region of 2.6 million is feeling the impact of soured relations with China, even while polling suggests the city continues to retain some of its traditional allure to the world’s most populous country as a desirable place to experience and invest in.
In addition to geo-political tensions, however, it must be said that Metro Vancouver’s real-estate market has also lost some of its global appeal because of financial trends. As a result real estate prices fall in many parts of the West, especially in the Lower Mainland. That’s while housing values have been rising in China.
Let’s look closer at what’s leading China’s upper- and middle-classes to steer away from buying into Metro Vancouver real estate like they once did.
China’s investors are also this year not pouring the same billions into high-end commercial or residential properties in adjacent Hong Kong, which has up until now been the top investment destination for China’s wealthy.
One reason for China’s investors pulling back is their rising suspicion of the West, including because of the erratic ways the U.S., some European countries, Canada and others have handled the coronavirus outbreak.
Although the World Health Organization and other health experts say COVID19 emerged in Wuhan, China’s state media claims the country has kept a better lid on it than the West. That’s lead to nervousness among many Chinese citizens about getting sick abroad, as well as fear about being blamed for spreading the virus.
The South China Morning Post, for one, has been talking to rich and middle-class people around China and discovering they’re losing their appetite for buying real-estate “investment vehicles” in the West, in part because of such COVID-19-related fears and mistrust.
That’s goes with their weakening desire to send children to study abroad, where many became involved in real-estate on behalf of their families. At the end of 2019 there were 640,000 students from China around the world, 144,000 of whom were in Canada and 50,000 in B.C.
In addition, however, an equally strong force that is diminishing Chinese people’s interest in buying Metro Vancouver’s pricey houses and condominiums, according to the Hurun Report, is that the city doesn’t offer the same profits it once did.
Housing values have dipped in Metro Vancouver since 2016, when buyers from China were deeply engaged in pumping up the city’s luxury market. And the Canada Mortgage and Housing Corporation predicted this week prices could fall an additional nine to 18 per cent in Canada because of the pandemic, and even slightly more in British Columbia.
Bigger real-estate profits are to be made in China.
The widely read Hurun Report is considered an authority on what it calls “China’s high-net-worth individuals.” And its 2020 report said, even before COVID hit, that China’s rich were finding some of the most rewarding real-estate ventures were in their own country.
“Twenty-seven Chinese cities entered the top 50 cities (around the world) with the highest house price increases,” said this year’s Hurun Report. Many of those Chinese cities had values leap 35 to 45 per cent over just three years. There’s no suggestion such hefty profit margins are being seriously dented by COVID-19.
Much of the sharp rise in China’s real-estate prices is the result of its authorities becoming more intent about enforcing a US$50,000 a person limit on the movement of funds out of the country – and banning the widespread use of credit cards, including China’s UnionPay, for buying foreign real estate.
Vancouver realtor David Hutchinson said this week that, for many of the reasons mentioned here, “China is not coming” to local real estate like it once did. “That ship has sailed.”
His perspective echoes that of West Vancouver realtor Nicole Lee, who said earlier that many rich clients from China are looking elsewhere now that B.C. has brought in a foreign-buyers tax on housing, along with a speculation and vacancy tax.
However, even though Metro Vancouver and it’s real estate might be down in the minds of many of China’s wealthy, they’re definitely not out.
Although five years ago China’s rich ranked Metro Vancouver as the third most desirable city in the world for “overseas property purchases,” this year’s Hurun Report says they still rate this relatively small city on the West Coast of Canada as seventh.
In addition, the Hurun Report says China’s high-net-worth parents pick Canada as their fourth favourite place to send their children for an education. As well, out of the 10 million Mainland Chinese who are transnational migrants, according to the Migration Policy Institute, half have ended up in Hong Kong and the U.S., while Canada has been, and remains, their third most popular choice, with Australia fourth.
There are now more than 500,000 ethnic Chinese people in Metro Vancouver, the majority, because of recent migration trends, from China. They can find familiarity in the city’s vibrant ethnic Chinese supermarkets, retail outlets, entertainment, restaurants and housing.
There might not be quite the tremendous volume of money coming out of China into Canada’s property market as there has been in the past two decades, but streams of Chinese capital are sure to continue to make their way across the Pacific.
That should be the case despite the tensions wrought by COVID-19 lockdowns, Huawei controversies, Hong Kong clashes and even a stumbling local real-estate market.
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