The Canada Mortgage and Housing Corporation has reduced Vancouver’s real estate market to moderately vulnerable from “highly vulnerable,” a designation it carried for three years.
The reduction is largely due to a sales pace that’s nowhere near as fervent as it had been before new mortgage rules were introduced in January 2018. Additionally, CMHC is not as worried anymore about price escalation in the city, reducing its concern from “moderate” to “low.”
According to CMHC, rapid price escalation occurs when there’s sustained speculative activity in the market. The government agency considers overvaluation the result of prices levels that aren’t congruent with local employment and wage gains.
Still, CMHC considers overvaluation to be moderate in Vancouver.
“When they talk about prices and affordability, it’s still very much in their red zone,” said Turcotte. “The reason the designation had to do with the slowing pace of sales and the slight reduction of pricing, but the latter alone wouldn’t have done it. It’s not an overheated marketplace where demand exceeds supply, which drives prices up at unprecedented levels. If we look at prices relative to local incomes, they’re still unaffordable and there’s no question we have to recognize we’re not only a local economy: we have global appeal with growth of high-income immigration. The strong demand here will, from a global interest perspective, keep prices high.”
The sales cycle is also rebounding in the city. July sales figures released by the Real Estate Board of Greater Vancouver show a 23.5% year-over-year increase, for a total of 2,557 sales, outdoing last year’s 2,070. It also marked a 23.1% increase over the 2,077 home sales recorded in June 2019.
And while sales in July were 7.8% below the 10-year average for the month, Turcotte reminds the previous decade has been an aberration.
“The 10-year averaged a number we will always struggle to meet because those were unprecedented 10 years,” he said. “I think the whole dynamic of the marketplace has changed in Vancouver, and what it shows us is that with ‘normal’ buying activity we see prices hold.”