Real estate moves in cycles, but not all real estate markets, or property types, are in the same part of the cycle at the same time. This can be frustrating for buyers and sellers who are trying to assess their current market in order to make better-educated decisions about property buying or selling.
In recent months, this assessment has been exasperated by the various different factors, in particular, the ongoing impact of January’s latest mortgage stress test, along with new provincial and municipal housing taxes and rising mortgage interest rates.
To keep up with the ongoing market cycles in Greater Vancouver’s municipalities, we began to track the monthly market type for more than 20 municipalities in the Lower Mainland. By tracking the month-to-month change in the market type, we get a snapshot of how competitive each market currently is and get a chance to track the change in this competitiveness over time — giving us an overall trend that can help buyers and sellers who are currently in the market.
What is a buyers’ or sellers’ market?
Finding out whether or not a city or neighbourhood is in a buyer’s, seller’s or balanced market doesn’t indicate that the area is affordable. Instead, determining the type of market helps buyers, sellers and investors to understand how competitive it will be to buy or sell a home in that area.
To gauge the level of competition in a market, many real estate boards and some analysts use a ratio known as sales-to-new-listings (SNL). The problem with the SNL ratio is that it ignores stale listings — homes that came on the market more than 30 days ago. By ignoring these older, more dated listings, the ratio provides a distorted impression of how competitive a market really is, during that time period. To help overcome this distortion, we use the sales-to-active-listings ratio, also known as the market absorption rate ratio. This ratio captures all active listings — new and stale — and compares it against all sold properties. This gives a more accurate picture of the supply and demand within a real estate market. This metric can also be used to measure markets of any size, from a national scale right down to a specific neighbourhood.
Are market cycles for houses and condos the same?
Houses and strata-units (which include condos and townhomes) move in different market cycles. In recent months, the inventory of single-family houses began to grow and, as a result, prices began to drop, yet this didn’t happen for condos or townhomes. Instead, demand for strata-units has increased in many Greater Vancouver markets; an indication that the two property types — freehold and strata — move in different market micro-cycles.
Over the last few months, we’ve been tracking these micro-cycles in an effort to assess the current market type in each neighbourhood and the ongoing trends. The result is a snapshot of the market type for each of the more than 20 different areas in the Lower Mainland for both freehold houses, as well as for condos and townhomes.
For a better understanding of the top areas and neighbourhoods for buyers and sellers, see our Top 10 lists below.
Share this infographic
As expected, the new mortgage stress test (introduced on January 1, 2018) along with rising mortgage interest rates really helped to reduce a buyer’s purchasing power this year. One solution for many buyers was to find areas where they could get more for their money. While some opted to search for a smaller property (usually switching to townhomes or condos) others went further east, to Maple Ridge and Pitt Meadows. For that reason, Maple Ridge and Pitt Meadows have both experienced sellers’ markets even as surrounding areas experience a build-up of inventory and a significant drop in pricing.
Key takeaway: Buyers can expect more competition in areas with lower-priced houses, such as Maple Ridge and Pitt Meadows
As a buyer, the key takeaway here is that you’ll need to compete and pay a premium if you end up shopping for a single-family or freehold home in Maple Ridge or Pitt Meadows, while other areas — such as Langley, Surrey and Abbotsford — are in a balanced market. Buyers with a larger budget can find good options on the North Shore, in the Tri-Cities or in Metro Vancouver, since all of these areas are in a buyer’s market.
Keep in mind, however, the single-family home market in the Lower Mainland continues to adjust. Recent sales numbers revealed a 43.5% year-over-year decrease in September’s sales and a 17.3% month-over-month decrease. This downward trend doesn’t appear to be slowing as we move into 2019 (where buyers face the threat of higher mortgage rates).
Condo & Townhouse Report: November
Share this infographic
Activity for condo and townhomes has been swift over the last few months. In September, more than 80% of Lower Mainland municipalities were in a seller’s market, when it came to condos and townhomes. In October, buyers got a bit of respite, when the number of areas in a seller’s market dropped to 60%. This month, the trend towards a more balanced market continues with the number of areas in the Lower Mainland still in a seller’s market dropping to 41%.
This is good news for buyers interested in a condo or townhouse, particularly for buyers looking at purchasing a strata-unit in Ladner, which has swung into a buyer’s market.
For the best neighbourhoods, see the Top 10 lists below.
Key takeaway: Patient buyers can expect more market corrections, but need to consider erosion of purchasing power due to rising mortgage interest rates
First-time home buyers make up the bulk of the buying market and it’s these very buyers who are being hit the hardest with recent mortgage regulation change and, now, with rising mortgage interest rates. Now, buyers need to factor in the erosion of their purchasing power with each incremental mortgage rate increase. A general rule of thumb is that with each 100 basis point jump in rates, a buyer loses about 10% of their house-buying budget.
For that reason, we don’t expect a swift return to a balanced market for all areas in the Lower Mainland unless, of course, there is a swift increase in mortgage interest rates. As such, buyers looking for condos and townhomes in the most populated area of B.C. will need to accept that prices will not correct as quickly for townhomes and condos. This will also mean consistent competition in highly sought-after areas.
For a few good bets, consider the following, ranked based on the market absorption ratio or sales-to-listings ratio.
The best bet for buyer’s are neighbourhoods with lower market absorption rates.
10 Top areas in Greater Vancouver that favour single-family home Buyers
- Marpole, Vancouver West
- Saunders, Richmond
- Maillairdville, Coquitlam
- Lackner, Richmond
- Chartwell, West Vancouver
- Murrayville, Langley
- Hastings East, Vancouver East
- Elgin Chantrell, Surrey – White Rock
- Collingwood, Vancouver East
- Steveston North, Richmond
10 Top areas in Greater Vancouver that favour condo & townhouse Buyers
- Queensborough, New Westminster
- Central, Burnaby
- Panorama Village, West Vancouver
- Pemberton, North Vancouver
- Saunders, Richmond
- Shaughnessy, Vancouver West
- South Cambie, Vancouver West
- Canyon Springs, Coquitlam
- Point Grey, Vancouver West
- Renfrew, Vancouver East
The best bet for sellers are neighbourhoods with higher market absorption rates.
10 Top areas in Greater Vancouver that favour sellers of single-family or freehold houses
- Mid Meadows, Pitt Meadows
- East Richmond, Richmond
- Stave Falls, Mission
- Serpentine, Cloverdale, Surrey
- Port Guichon, Ladner
- Norgate, North Vancouver
- Poplar, Abbotsford
- Riverwood, Port Coquitlam
- Big Bend, Burnaby
- Sea Island, Richmond
10 Top areas in Greater Vancouver that favour sellers of townhouses and condos
- Coquitlam East, Coquitlam
- North, Maple Ridge
- Oxford Heights, Port Coquitlam
- South Arm, Richmond
- McNair, Richmond
- Deep Cove, North Vancouver
- Fraser Heights, Surrey
- College Park, Port Moody
- Aldergrove, Langley
- Tsawwassen Central, Tsawwassen