Downtown Listings and Sales update

What a February it was! 



The Olympics have come and gone and Vancouverites are now getting back to normal. The parlolympic games are up next and the disruptions should be less than in February. Some so-called pundits predicted that with the passage of the games condo values along the waterfront in Coal Harbour would triple. Others think the bottom will fall out of the market. I believe the truth will lay somewhere inbetween and I think history will show that pre-existing macro-economic trends will have more to do with Coal Harbour's future market conditions than will a 2 week sporting event, no matter how exciting it was.

Having said that, transportation in the downtown core during the games was much easier than anticipated. Due to the no parking rules and the "aversion factor", many stayed away from the city making it much easier to drive than it is on normally. Active listings have continued to accumulate and as of March 1 we had 1083 active listings, up from 960 in January. Sales slowed from 152 in January to 113 in February.

To view March 1 Coal Harbour sales stats, click here: Coal Harbour Monthly Stats 
To view listings and sales for the entire downtown Vancouver area click: Downtown Vancouver monthly listings and sales.xls

I share the view that the Olympics will have a positive effect on Vancouver in the long term but not in the sense that the world is suddenly aware of the city and its real estate, but rather, that Vancouver will benefit thanks to the legacy of improved transportation infrastructure, the addition of world-class recreational facilities and possibly due to increased tourist dollars in the long run. History shows that previously-developed host cities receive almost no benefit from Olympic games. See my previous BLOG posting on this subject. In fact, in the short term, many have suffered temporary setbacks in their real estate markets.

So what will this year actually bring for downtown Vancouver's real estate market?

Opinions are polarized and here's what I see: Active listing inventory will continue to grow as the year wears on. outpacing demand, especially in the higher end of the luxury condo market. As an example, The Fairmont Pacific Rim began it's completions (closings) a few weeks ago and already has 20 units listed for resale. Only one resale has been registered on MLS during the same period.

Demand will likely remain quite strong in the mid and low markets until interest rates increase. Pricing may increase slightly but affordability will mitigate any Olympic gains this year. I don't rates increasing before the Fall so we should have strong spring and summer markets, from a seller's perspective. However, given the existing issue of affordability in our market, rising interest rates could have a profound effect on demand. The HST (Harmonized Sales Tax - a combination of Provincial sales tax of 7% and Goods and Sevices Tax 5% = 12% tax) will replace the 5% GST tax currently payable on New Construction real estate as well as real estate sales commissions. This will increase the cost of new homes dramatically and increase seller's commissions costs by a smaller margin. I believe that developers will have no choice but to absorb much of this cost increase given the limitations of affordability.

As an macro dynamic, I see the following:

If economic recovery continues and there's no double-dip recession, global financial markets will improve, adding support to the luxury end of the real estate market. In this case, rates will rise putting the squeeze on the lower end of the market thereby pushing values down. From a seller's point of view, continued positive global economic news will be good for the top end of the market and bad for the mid and lower end. Economic recovery means a return to development and the ongoing addition of new properties to the market = increased competition for resales = downward price pressure.
 
However, if economies stumble and the global recovery faulters, interest rates will remain low and growth in global financial markets will likely be limited. In this case, international investment activity in real estate (read: luxury waterfront condos) may remain slower. This scenario represents a challenge for luxury real estate values and a blessing for sellers of mid and lower price-point properties. It would also mean a delay in the return to development, thereby mitigating the addition of new properties to the market.

In any case, most reports call for 2010 to be a good year for the market and this spring and Summer to be the last Hurrah in terms of near-term value gains. Almost every report calls for a settling of values into 2011. Some even claim we are entering bubble territory now. The Federal Government has expressed concern in this regard by recently tightening mortgage qualification standards. The truth will be told in the fullness of time.

So what's my recomendation?

When I am asked, "So, is it a good time to sell?", I always respond that it depends entirely on your individual situation. If you believe, as I do, that general market values will "relax" as interest rates rise, if you have made good gains on your investment and have identified other uses for your equity, and if the exchange rate is favourable now compared to when you bought, then it may be a very good time to sell.

However, if you bought a new condo in 2008 or later and didn't get an extraordinary deal on the way in, if you have no better use for your equity and the exchange rate doesn't favour a sale now, then it may not be a good time to sell. Warning: If you think that you can price and sell your property way above the market because it's the "best property in the complex and you love it", please hold off until you are ready to actually sell. Adding wishful listings to the market does nothing but drive prices lower and that will effect you when it's time to sell.

I believe that there may be an opportunity to capitalize on the mirraculous recovery we've seen this year by cashing out now and then buying back when the market calms and listing inventory spikes in the next year or so. Keep in mind that the Millenium Water project (Olympic Village condos) - see photo below - have yet to come to market once the Paralympics are finished. Vancouver city is on the hook for approx $500 Million and I have heard that as many as 750 condos remain unsold in that development. Anyone who thinks that 750 new condos coming to market won't have an effect on the values of competing resale properties, is mistaken. This and many other new developments will hit the market in the coming year and to touch on Bob Rennie's statement that real estate pricing is "all about scarcity", I fail to see any supply scarcity in our future.



I look forward to hearing from you when it's time to consider your next move. In the meantime, have a great month.

Please contact Shaun directly shaun@shaunkimmins.com to discuss whether it's a good time for you to buy or sell and please feel free to comment on this or any of my other Blogs or visit me at my Century 21 In Town Realty website.