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Bubble, what bubble? - BCREA's latest report

Blog by Shaun Kimmins | June 14th, 2010

So where did all the buyers go? Could it be that they are sensing a potential "correction"? I hesitate to use the word bubble, given that all the experts are saying we don't and won't have one and that Vancouver is different, but I will say this: Vancouver's condo real estate market is no less immune to global economic macros than any other market is.

"But the Chinese are coming here in droves every week to buy properties"  Really? so where are all the sales?

Today, June 14 2010, the BC Real Estate Association published a report stating that MLS sales declined 4% from May 2009 to May 2010 and 11% from april 2010 to May 2010.


So maybe that's not a pop but it looks like a slow leak at least. Consider this: Year-to-date dollar volume is up 50% and prices are up 14% over 2009 and now buyers are evapourating into thin air. What will that mean for prices? You be the judge. The following are some stats I included in a recent market analysis of a luxury waterfront condo at 1777 Bayshore in Coal Harbour:

Downtown Vancouver’s Luxury Condo Market

Vancouver’s downtown condo market has become increasingly challenging for sellers in 2010. Uncertainty surrounding interest rates and global economics continue to cause would-be buyers to hold off, wait-and-see. At the same time, many sellers have over-priced their listings in hopes of adding to already inflated asking prices. The result is increased active listing supply and decreased buyer demand. Prices have begun to reflect this change in momentum and a buyer’s market is emerging once again. Only sellers willing to base their pricing in the reality of similar past sales have any hope of selling in the current market.

The ‘Fairmont Effect’

This is a term I coined last year and - in my opinion - is something that has caused terrible damage to the downtown condo market this year. This is the effect that the raft of unbelievably over-priced active listings at The Fairmont (35 or so on any given day) has had on the perception of other downtown luxury condo owners as to the value of their properties. It has been the catalyst for the worst and most widely-spread over-pricing I have seen in my real estate career and has caused many sellers to miss the market. The good news is that properly priced listings stand out as bargains when, in fact, they are just properly priced. Here in lies the opportunity.

Current Downtown Condo Activity

As of June 11, the MLS shows 1768 active condo listings in downtown Vancouver. There have been just 139 sales in the last 30 days. This results in there being 13 months of active listing inventory. In Coal Harbour a similar inventory glut exists: 274 active listings, 129 sales since January and only 11 sales in the past 30 days meaning there are 25 months of active listing inventory.

Comparable Condo Activity ($2M-$3M)

In the above price category there are currently 62 active listings in downtown Vancouver. In the past 30 days there have been 2 sales and there have been just 24 sales in this category since January 2010. At approximately 4 sales per month we are looking at approx 15 plus months of active inventory in your condo’s category. In Coal Harbour ($2M-$3M) there are 28 active listings, 5 sales since January and 0 sales in the past 30 days.

*Inventory Rule of Thumb

In Vancouver’s real estate market, 0-4 months of inventory = upward price pressure, 4-8 months of inventory = flatter pricing and anything over 8 months of active inventory = downward price pressure. I am seeing between 10 and 20 months of inventory in most price categories. This supply and demand ratio is now being reflected in reductions in both listing and sale prices.

Buyer Attitude - (they aren't lining up in downtown Vancouver anymore)

It might sound funny, but for many people Real Estate is basically a sport in Vancouver and the participants are price and value savvy. They know what market value is on any given property. Buyers’ agents have access to all the same information listing agents do so there’s no pulling wool over anyone’s eyes here. In this year’s less frenetic downtown condo market buyers are simply taking a wait-and-see attitude when presented with an opportunity they consider over-priced. Right or wrong, in terms of their offer prices, most current condo buyers are hedging into the anticipated pricing decline that many pundits are predicting will start later this year and extend into 2011. In my estimation we are already off by 10% from the highs seen last year. 

I'll keep saying it untli it sticks

When you want to sell and you're ready to sell, hire an area expert realtor, price it right and get it sold. Call me.