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The Real Estate Market Has Cooled in Vancouver's Suburbs – Storeys

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Erin Nicole Davis

The real estate market in Vancouver’s once red-hot suburbs has cooled in the past six months, as life returns to normal in the “big” city. 

In Vancouver’s suburbs — places like North Vancouver, Burnaby, Coquitlam, Port Coquitlam, Surrey, and Langley — the real estate market has dialled back the drama when it comes to both frenzy and prices. 

According to data from the Real Estate Board of Greater Vancouver (REBGV), prices began to cool in Vancouver’s suburbs in the past six months after reaching record-breaking highs since the onset of the pandemic.

“There has been a substantial change in the market in regards to everything from market sentiment, to listing prices and offer strategies, and the overall number of homes on the market,” says British Columbia (BC)-based realtor Alex Dunbar. “All of this has led to a more balanced market although we are still a ways from a buyer’s market. However, certain subareas are starting to get pretty close to those numbers in regards to sales-to-active listings ratio, which is the number we look at to give us this an indication of the type of market we’re in. This is determined by taking the current number of sales for a given period of time divided by the current new listings for a given period.”

Once a given, Dunbar says that suburban bidding wars are for the most part a thing of the past and that subjects have returned to almost all offers. “Buyers now hold the majority of the power and ability to negotiate,” says Dunbar. “Far fewer homes are being listed a week prior to taking offers at a price lower than the sellers are expecting to get and these days, most homes are being priced at or close to what sellers want right from the start and offers are being taken as they come. Buyers no longer want to compete and they have enough options out there that they can avoid these situations most of the time.”

Vancouver and Langley-based mortgage professional Alex McFadyen agrees that there’s been a shift in BC’s real estate market. “We are seeing less multiple offers and frenzy on properties, although with the right property and location, we are stilling seeing listings, there are a lot less of these conversations happening and certainly more financing conditions and subjects on most properties outside of the ‘hot’ properties,” says McFadyen. 

Dunbar highlights that the most substantial price decreases have been in the most suburban cities in the lower mainland which conversely had the most drastic relative price increases. “For instance, places like Chilliwack and Abbotsford were up 97% and 83% respectively from the start of the pandemic (March 2020) until the peak in February 2022,” says Dunbar. “This is where we’ve seen the biggest slow down with it becoming less and less drastic and we head further west towards Vancouver.”

The Golden Ears Bridge, connecting Maple Ridge to Langley. Long exposure at night, reflecting into Fraser River. Beautiful British Columbia, Canada.

Dunbar says he’s also seeing a compression of the market based on property type. “What I mean by that is that the relative price comparisons between condos, townhomes and detached homes got extended to the point that it was becoming more and more unrealistic for homeowners to climb the property ladder and make that jump to the next property type with an emphasis on the gap between townhomes and detached homes,” says Dunbar. “However, we are now seeing the biggest declines in detached homes followed by townhomes and then condos. For context, in the Fraser Valley these numbers were a -13.7% change in price for detached, -10.7% for townhomes and -7.6% for condos.”

Additionally, Dunbar points to how prices in the valley (east of the Fraser River) have also closed the gap significantly when compared to those part of the Greater Vancouver Real Estate Board (west of the Fraser River). “So, what was once a more attractive option due to affordability, being able to get have more space, and the ability to work from home, are no longer as prominent — especially with other factors such as more people being asked to return to the office, at least on a part time basis,” says Dunbar. “With prices for pre-construction condos in places like Surrey hitting prices over $1200/sq ft and Langley close to $1100/sq ft, the numbers are making less and less sense when compared to those of Vancouver and the cities nearby.”

Naturally — as in other parts of the country — climbing interest rates have played a role in the cooling of BC’s market. McFadyen, however, says he hasn’t noticed a notable drop in mortgage-seeking clients. Not yet at least. 

“Our applications are still very much in line with the same time last year, with a slight reduction in refinances and less ‘fringe’ inquiries; we’re seeing more “serious” applicants now,” says McFadyen. “So, in turn, the numbers are down slightly but perhaps only 5-10% — nowhere near as dramatic as being reported.”

With that said, McFadyen says that the next BOC (potential) increase will put a damper on lending, as it will most likely at that point start to impact qualification. “I would suggest a more balanced but less transaction heavy summer,” he says. “If interest rates to not increase by more than .75% I would anticipate a run up in the fall as more people are realizing the opportunities available to them in this more supply heavy market and as more home sellers decide NOT to sell with prices declining. This could equal a rising price environment by the end of the year. There are quite a few variables here though so we’ll see!”

As for the return to normalcy, it’s unlikely that Vancouver’s suburbs will lose their appeal once the pandemic and its remote work culture become a distant memory. According to data from Sotheby’s International Real Estate and the Mustel Group’s latest survey, nearly half of Vancouver’s Generation Z residents say they plan to buy their first home outside of a major city, with 44% reporting they plan to purchase their first property in a suburb.

In the meantime, Dunbar says summer will likely show more of the same situation in Vancouver’s suburbs.

“There is continued fear looming around more future interest rate hikes and many are sitting on the sidelines to see how things play out in the suburbs,” says Dunbar. “I think we’ve seen most of the ‘froth’ of the market come off the top already so I wouldn’t expect as drastic of price drops as we’ve seen these past 2-3 months from the peak, but there is going to be continued balancing/slight downward pressure as we get closer to a balanced market. I don’t think we’ve seen the full impact of the interest rate increases yet but that is something that each individual must weigh for themselves as future increases will also lead to decreased buying power. So, even if prices are to come down a little further, you may no longer be able to afford them.”

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Real estate: 27 per cent of homeowners accessed credit, survey finds – CTV News

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A new survey exposes balance sheet vulnerabilities for some Canadian homeowners amidst rising interest rates.

Released by BNN Bloomberg and RATESDOTCA, the survey found that 27 per cent of homeowners who participated have accessed a home equity line of credit (HELOC). Almost 80 per cent of those participants have used it, and half of them said they have done so in the last two years.

Aside from the pressure of increased interest rates, HELOCs are complicated by new real estate loan guidelines announced by the Office of the Superintendent of Financial Institutions on Tuesday. In late 2023, borrowers will be required to pay principal and interest on combined loans above 65 per cent of the property value.

Prior to these guidelines, HELOCs were an ideal way for homeowners to tap into their home equity during the prior decade’s low interest rates and high home prices, but the survey findings suggest that the Bank of Canada’s recent interest rate increases might have changed the way older Canadians leverage their home value. With HELOCs being based on variable-rate interest, borrowers will be hooked to higher payments.

Since HELOC lenders are able to demand full payment at any time, this can raise concerns for consumers who have not set aside extra money to pay down their HELOC amidst the pressure of rising interest rates.

According to the survey, 58 per cent of respondents said they have an outstanding balance on their HELOC.

Although the majority said they borrowed less than $50,000, 10 per cent said they borrowed more than $100,000. Balances of at least $50,000 were more common for Canadians aged 55 and older.

Of the 1,507 Canadians surveyed, 65 per cent said they were homeowners.

With files from BNN Bloomberg and RATESDOTCA

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In Ontario, real estate buyers are holding out for a price cut – The Globe and Mail

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A house for sale in the Riverdale area of Toronto on Sept. 29, 2021.Evan Buhler/The Canadian Press

The stalemate that is taking hold in the Ontario real estate market right now arises from a belief that is becoming more entrenched each month: buyers reckon prices have farther to fall.

House hunters see properties in some areas selling at 15 per cent or so below the high-water mark set in the first quarter and decide to hold off for an even steeper discount. Sellers either refuse to budge or feel the landscape shifting under them and rush to complete a transaction before more ground crumbles away.

The war in Ukraine, stubborn inflation and the rise in interest rates have precipitated a much more tumultuous real estate market than industry watchers were predicting even a few months ago, according to John Lusink, president of Right at Home Realty.

Mr. Lusink says sales for June are set to come in about 26-per-cent below even his conservative projections at the start of the year, continuing a trend that has been on a downward slope since February.

“We can throw that forecast out the window,” he says of his projections for 2022.

The landscape is the same across the Right at Home network, which spans 12 regions of Ontario.

The number of listings, meanwhile, is gradually increasing after a slow spring, he adds.

Mr. Lusink expects the final tally for Right at Home’s sales in June to show a 37-per-cent drop from the same month last year.

“It’s, needless to say, concerning.”

Rishi Sondhi, economist at Toronto-Dominion Bank, points out that sales and prices have fallen disproportionately in Ontario and British Columbia, where prices climbed the most during the pandemic. The retrenchment in activity is especially hard in the Greater Toronto Area, where investors have played a particularly large role in the past year.

The downturn is part of a worsening picture across Canada, as sales and prices continued to decline in May under the weight of higher interest rates, Mr. Sondhi points out. Some sales were likely pulled forward to late 2021 and early 2022 as people braced for higher rates, he adds.

The economist says some GTA buyers also likely purchased new homes before selling existing properties, expecting the market would remain hot, he adds. Those sellers may be forced to accept lower prices now in order to complete the new deal, but he expects that dynamic to run its course before too long.

Mr. Sondhi is forecasting a continuing decline in prices throughout the rest of the year as a reflection of sharply higher interest rates.

Alongside the buyers betting that prices will slide, Mr. Lusink says, stands another cohort ready to buy – but the task has become much harder with the rise in rates. One buyer Mr. Lusink spoke with recently had obtained a fixed-rate mortgage at 4.3 per cent, which is almost double the rates buyers were able to lock in just a couple of years ago.

The mortgage “stress test” requires borrowers to show they can handle mortgage rates approaching seven per cent and above, he points out.

A recent survey commissioned by Right at Home also shows a shift in attitudes: Only 19 per cent of potential first-time homebuyers in Ontario plan to buy in the next two to three years, compared with 30 per cent who planned to buy in 2021, according to the study.

The percentage of homeowners planning to sell who are doing so to take advantage of current market conditions increased to 23 per cent this year from 11 per cent last year, the data shows.

The Maru Public Opinion Survey polled 813 Ontario adults in May and has an estimated margin of error of plus or minus three per cent 19 times out of 20.

In Burlington, Ont., real estate agent Tanya Rocca is already seeing homeowners preparing properties for sale before the fall market arrives.

“It’s very busy right now,” says the agent with Royal LePage Burloak Real Estate Services. “People are panicked.”

Ms. Rocca says prices in the area which have dropped between 12 and 15 per cent from the February peak.

The average price of a freehold property dropped to $1.431-million in May in Burlington, she says, compared with the $1.51-million buyers were paying in April and the $1.6-million in February and March.

Homes on Bessborough Drive in Toronto’s Leaside neighbourhood on May 11.Fred Lum/the Globe and Mail

The affluent city, which sits on Lake Ontario west of Toronto, was one of the many communities that saw a large influx of buyers during the pandemic as people sought more space. Burlington’s historic downtown core and large selection of detached houses with pool-sized lots have made it very popular with families.

Ms. Rocca says many buyers didn’t even have a chance at a house in the midst of ferocious bidding wars; now people have their choice of properties.

Some current sellers have been caught in the market transition, Ms. Rocca adds, because they bought a new property before selling an existing one.

“Buyers, in fairness, are getting the power back – which they love,” she says. “There are great opportunities out there because people need to sell.”

Ms. Rocca was shocked at some homeowners earlier this spring who were disappointed on offer night when they received bids that came in $300,000 or $400,000 above the asking price.

“People were debating whether they should take it.”

She recalls one pair of homeowners with a home backing onto a golf course who listed their property with an asking price of $2.5-million. The sellers were disappointed they didn’t receive a hefty amount above asking.

“They got their asking price literally the week things started to shift,” Ms. Rocca says. “They were so close to not taking it.”

As the summer begins, it’s not uncommon to see listings sitting with 30 to 50 days on market, she adds.

In the current environment, Ms. Rocca recommends setting a price near the realistic market value. She often “sharpens” it a little bit to make it more attractive compared with other competing properties in the area.

To help homeowners come to terms with the new reality, she stresses that first-quarter prices were the result of an overheated market – not an accurate reflection of value.

“This is not money they’ve lost – they never had it.”

Ms. Rocca says some people who purchased properties in Burlington at the beginning of the pandemic are now being called back to offices in Toronto. With more cars on the road and the price of gas skyrocketing, many are reluctant to commute.

“People were making such rash decisions during COVID,” she says, adding that some of those folks are now selling and moving back to the GTA.

With such an extended run-up in real estate prices while rates were low for years, the market in Ontario saw a few blips but no real correction, she points out. A move to restore balance is healthy, in her opinion.

“I think we’re going through a cycle right now which is very much needed.”

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OSFI makes real estate loan changes aimed at reducing lender risk – Investment Executive

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IIROC’s Kriegler to lead new SRO

Regulators are also forming a new advisory committee to review SRO consolidation

  • By: IE Staff
  • June 27, 2022
    June 28, 2022
  • 17:46

Ottawa lost average of $22 billion a year in unpaid tax from 2014-2018: CRA

The agency released its first report on Canada’s overall tax gap

Executive moves this week

Industry veterans are taking on new roles, including Andrew Kriegler with the forthcoming new SRO and Morningstar’s Michael Jantzi

CSA lays out priorities under incoming chair

Three-year plan focuses on CFR enforcement, dispute resolution and crypto

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