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2010 Outlook - Where's the Vancouver, Coal Harbour condo market going?

Blog by Shaun Kimmins | January 13th, 2010

2010 will be an interesting year for Vancouver real estate for a number of reasons, not the least of which are the prospect of rising interest rates and the HST tax (as of July 1 2010 the GST of 5% will increase to a blended or "Harminized" tax of 12% on all goods and services). We will see the Olympic games (a hinge point for countless investors) come and assuming current economic trends continue towards recovery many governments will begin the inevitable belt-tightening needed to reign in current stimulus spending. If the economic recovery hits any of several bumps in the road that many economists fear are lurking, then the story will be very different.

In the case of continued positive economic news, interest rates are sure to rise. Most predictions point to a .5%-1% increase by year-end. Given the miraculous recovery we have seen in the broader Vancouver and Canadian real estate markets affordability is once again becoming an issue. Add to that higher interest rates and I see a softening in the lower end of the market. In condo terms this means 1 bedroom condos <$400K and 2 &3 bedroom condos <$1M. Call it the first-time homebuyer sector. In this scenario, I expect increased active listing inventory paired with lower demand resulting in a relaxation of prices at these levels. With positive market activity I expect the luxury end of the condo market to rebound and firm up after a year of significant challenges for properties above the $2.5M mark. Stronger markets generally mean increased international investment in Coal Harbour.

A double dip or protracted economic recovery will likely mean continued low interest rates. This would stoke the fire the bottom of the market and continue to encourage first-time and interest rate dependant buyers. In this case I see a better year for the bottom end and another challenging year for the luxury condo sector which is largely driven in Coal Harbour by international owners.

Regardless of which way the macro economic story plays out, I expect a significant sell-off of investment condos (mostly small 1 and 2 bed units) that were bought with rental income and an ownership horizon hinging on the 2010 games in Vancouver. I have received numerous calls from multi-unit investors expressing concern about "what is going to happen after the Olympics". If investors en masse come to the conclusion, as many already have, that they have made their gains and that the market may cool into 2011-2013, listing inventory is going to spike. Add to that the 750 or so condo units that will be marketed at Millennium Waterfront after the games as well as countless units coming onto the resale market listed by investors, some who bought large discount blocks of units (by some accounts in the hundreds for some individual investors) in presales over the past 3-5 years and we have a recipe for a serious over-supply and softening prices.

So to summarize, I believe that Coal Harbour in particular will be directly effected by unpredictable macro-economic forces paired with an investor sell-off of some magnitude. Which way it will go is one for the economists but I will say this: Owners who bought between 2001-2005 have made their gains in this market cycle and I believe we are witnessing the bubble after the bubble in Canadian real estate, driven by low interest rates and a disconnect between fundamental economics and a willing suspension of disbelief on the part of Canadian consumers. Many experts are warning of a 10%-20% correction in the Canadian housing market in the next 2 years. Coal Harbour is more internationally driven but you get the point.

Is it a good time to sell? This is the $64,000 question and one that must be weighed against each individual's specific circumstances. If sellers have the opportunity to leverage both the current price recovery as well as advantageous exchange rates, then one can make a compelling argument for selling. If one's horizons are long then it's not difficult to believe in the Vancouver and Coal Harbour markets but this belief must be accompanied with patience and a tolerance for currency-risk.

In the specific case of your property, Please contact shaun for a no-obligation assessment of the current value of your property if you are thinking of selling. The momentum we enjoyed through the end of 2009 continues as the threat of rising interest rates approaches and I expect buyers will want to purchase in front of any increases so now is a good time to leverage that momentum. With the uncertainty of terrorist threats and macro economic news, it's really anyone's guess where the market is headed but I can say that the current market is a good place to be a seller right now.

To view shaun kimmins at Century 21 In Town Realty