Even with the national market slowdown, the most expensive city to buy a detached home continues to be Metro Vancouver and its close environs (including West Vancouver, North Vancouver and Richmond, B.C.).
While provincial and federal governments have taken steps to cool down the Lower Mainland market, using various taxes and regulations, the benchmark price for a detached house in Vancouver remains well above $1-million CDN. But value is relative. Just ask any buyer who, for the last half a decade, has been waiting for a market correction in Metro Vancouver and surrounding areas in order to jump in and buy a single-family home. Well, wait no more.
According to recent statistics released by the Real Estate Board of Greater Vancouver (REBGV) and the Fraser Valley Real Estate Board (FVREB), 43% of the cities in the Lower Mainland are now in buyer’s territory. Another 38% are balanced markets, where supply is meeting demand. Only 19% of the 21 cities analyzed are still entrenched in a seller’s market.
But here’s the shocker: Metro Vancouver, West Vancouver and North Vancouver, historically three of the most expensive cities to buy a detached house, are now in buyer’s markets. Burnaby, Port Moody, Richmond, Tsawwassen and Surrey – White Rock, round out the list. In comparison, the areas where sellers are most likely to have an advantage include Cloverdale in Surrey, Pitt Meadows, Maple Ridge and Mission, B.C.
Why use active listings versus new listings?
To measure how competitive each market is in the Greater Vancouver Area, Zolo calculated the sales-to-active-listings ratio for all major areas in the Lower Mainland. The sales-to-active listings ratio provides a glimpse into the current supply and demand of a housing market in a specific region. The higher the ratio, the more demand for the property, and the more opportunity a seller will have to attract a higher price for their home for sale.
To calculate this ratio, many boards, associations and brokerages will use sales-to-new-listings. But we don’t believe this is an accurate reflection of the current supply and demand relationship in a given geographical area. Instead, we dug a bit deeper and did a bit more work to calculate the sales-to-active listings ratio. In this way, the ratio captures current, unsold inventory that is sitting on the market, as well as new listings, and compares this in relation to current buyer demand (measured by the number of property sales in the same time period).
Remember, a ratio that’s higher indicates more demand and more activity, while a lower ratio indicates slower sales and the potential for falling house prices. A balanced market is when the supply of housing meets the demand from potential buyers. In a balanced market, sellers usually accept reasonable, close-to-list-price offers; homes typically stay on the market for close to the average number of days and prices remain fairly stable within the region.
According to the GVA boards, a ratio between 0% and 11% is a buyer’s market; a ratio between 12% and 19% is a balanced market; any ratio over 20% is a seller’s market.
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Key takeaway: Buy now or hold out for a correction
For the better part of the last decade, Canada’s real estate market has been in a build-up phase with most markets hitting their peak in 2018. Since then prices for detached homes in the Greater Vancouver area have started to either stagnate or fall.
By historical definition, an actual correction in a housing market only occurs when there a 10% reduction in either sales activity or pricing. Based on this definition it’s safe to state that no real estate market in B.C.’s Lower Mainland is undergoing a housing market correction, at this point in time.
5 Cities with the Largest Increase in Sales Activity
- Pitt Meadows, +20% from July to August 2018
- Cloverdale, +11%
- Mission, +6%
- Abbotsford, +3%
- Coquitlam, +2%
5 Cities with the Largest Drop in Sales Activity
- Port Moody, -7% from July to August 2018
- New Westminster, -6%
- Ladner, -5%
- Surrey – White Rock, -3%
- North Vancouver, -3%
& Richmond, -3%
& Port Coquitlam, -3%
That said, we know that historically, real estate market corrections are regular events. According to economist Homer Hoyt real estate market corrections occur over an 18-year rhythm. This doesn’t mean that each market cycle lasts 18 years, it means that when Hoyt averaged out each market cycle, based on peaks in U.S. land values, each real estate cycle lasted 18 years, on average. And this had been true since 1800.
In Canada, the last major price correction was between 1992 and 1996, when national housing prices appreciated by an anaemic 1%, compared to the 16% appreciation that occurred between 1988 and 1992. That means, according to Hoyt’s theory, Canada is four years overdue on a housing market correction. The exception to this is B.C.’s housing market. Greater Vancouver’s price correction is right on track with the last price correction occurring in the year 2000 when prices appreciated a meagre 3% (compared to 26% in the four years leading up to 2004, 59% in the four years leading up to 2008 and the 23% in the four years leading up to 2012).