Now, more than ever single-family homes in Vancouver feel so out of reach for many would-be buyers. Part of the problem was the massive run-up in property values over the last decade. But another factor in of this affordability problem is the trifecta of policies: new taxes, tighter mortgage regulations and higher mortgages rates have all worked to erode the purchasing power of prospective buyers. For many, this could mean giving up the dream of owning a single-family home in Greater Vancouver. Or it could mean adjusting how that home ownership dream actually looks.
As a result, more and more first-time buyers are searching for a condo or townhouse that best suits their current lifestyle and meet their future needs. But as buyer’s try and negotiate the frothy and competitive Lower Mainland market they need to keep one thing in mind: the market really isn’t in their favour.
According to recent statistics released by the Real Estate Board of Greater Vancouver (REBGV) and the Fraser Valley Real Estate Board (FVREB), only 19% (or 4 out 21 cities — 22 areas — analyzed in the Lower Mainland) are in balanced territory. The remaining 81% of the GVA is still firmly entrenched in a seller’s market.
Still, if you’re shopping for a condominium or townhouse, there are four areas that have moved into balanced territory (where supply meets demand). These four areas are: Abbotsford, Delta, Tsawwassen and West Vancouver.
Now, the five most competitive condo and townhouse markets in Greater Vancouver, according to the most recent data, are:
- Port Coquitlam, with only 2.69 months of inventory
- Mission, with only 2.80 months of inventory
- Cloverdale in Surrey, with only 3.05 months of inventory
- Vancouver East, with only 3.15 months of inventory
- and North Vancouver, with only 3.15 months of inventory
Typically, a market with less than six months of inventory favours the seller.
Active listings versus new listings, what’s the difference?
To measure market competitiveness — and to determine if a market favours buyers, sellers or neither — we used the sales-to-active-listings ratio. This ratio examines all properties that are currently for sale during a specific time period and compares that to the number of sales during the same time period. The lower the ratio, the less demand there is for that property or area and this signals a market more favourable to buyers. The higher the ratio, the more demand, which favours homeowners trying to sell their home or investment property.
Funny thing, though, many boards and brokerages don’t use active listings to calculate this ratio. Instead, they use sales-to-new-listings (also known as SNL or SNLR), which only compares sales during a specific time period to new listings that came on the market during that time period. By using the SNL ratio, however, you don’t really capture true demand or supply as you end up omitting all the stale properties that are sitting on the market. That’s why we dug a bit deeper and did a bit more work to calculate the sales-to-active-listings ratio. We wanted to capture the most accurate and up-to-date snapshot of each market in the Greater Vancouver Area.
To use the sales-to-active-listings ratio accurately, we borrowed a page from the two biggest boards in the Lower Mainland: The Real Estate Board of Greater Vancouver and the Fraser Valley Real Estate Board. According to these two 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. For context, 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.
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Key takeaway: Condos and townhomes are still hot, hot, hot
The increased popularity in urban condos and townhouses is due, in part, to demographics. As Mustafa Abbasi, President of Zolo Realty explains, the low- or no-maintenance offered in a multi-family unit appeals to baby boomers who are downsizing, families who want to be close to urban amenities and millennials who love a “live, work, play lifestyle.”
Abbasi adds, “the focus on condos isn’t solely in the building or the unit. The focus is shifting to include the community and neighbourhood.” Rather than slapping up a building with cookie-cutter units, some developers are focusing on the communal amenities, the external community space and the lifestyle the condo or townhouse complex can offer potential buyers. “When you’re living in a smaller space, you care about what’s around your home. The parks, the neighbourhood, the stores, they become an extension of your home space,” says Abbasi.
CMHC Chief Economist, Bob Dugan notes that with these updated demands along with high property prices and combined with rising mortgage rates, demand for condos will only increase. “We forecast that high price points and mortgage rates will shift demand away from the single detached home towards multi-family units.”
For buyers in the Greater Vancouver Area this means paying particular attention to how the condo and townhouse market is evolving in the short-term. The pressure on demand for these property types really escalated at the start of 2018, when buyers were priced out of the single-family home market due to the latest mortgage stress test. This erosion of affordability will only get worse as mortgage rates continue to increase in 2018 and going into 2019 and this will mean ongoing demand for condos and townhomes in the GVA.
5 Cities with the Largest Monthly Increase in Condo & Townhouse Sales Activity
- Mission, +12% from July to August 2018
- Coquitlam, +6%
- Downtown Vancouver, +3%
- Burnaby, +3%
- North Delta, +2%
& North Vancouver, +2%
& Surrey, +2%
5 Cities with the Largest Monthly Drop in Condo & Townhouse Sales Activity
- Pitt Meadows, -19% from July to August 2018
- New Westminster, -11%
- Port Moody, -11%
- Abbotsford, -9%
- Ladner, -8%
& Cloverdale – Surrey, -8%