Central Banks Balance Sheet Assets Versus Greater Vancouver Real Estate
Massive global credit expansion by the Central Banks around the world after the financial collapse in 2007 had a major impact on the asset prices for stocks, bonds and real estates around the world.
Credit growth from 2006 to 2018 was a massive $17 trillions, representing over 440% increase over a 12 years period.
Greater Vancouver real estate price growth over the same period was around 272%, presenting a 22.7% growth each year for 12 years. Knowing the fact that the real estates around the world are directly affected by global credits and interest rates, close monitoring on credit growth and interest rates will help to foretell the performance of Greater Vancouver's housing market.
BC Housing Measures
The early 2018 BC Government's housing policy measures include:
- A speculation tax aimed at absentee property owners that was targeted at homeowners who don’t pay much income tax in B.C.
- A hike to the foreign buyers’ tax from 15 to 20 per cent, and expanding it to areas including Victoria, Nanaimo, the Fraser Valley and the Okanagan
- A property transfer tax (PTT) hike for homes worth more than $3 million
- A registry that would record contract assignments in the pre-sale market
Detached home prices deteriorated further in 2018, and the market sentiment for townhouse and condo buyers turned sour during the second half of 2018.
Home Sales Versus Home Prices
When the rise in home prices for Greater Vancouver is compared to total home sales, the only time period when the price chart appeared to correspond to the price gain was from 2013 to 2016. Detached homes made huge price gains from 2009 to the end of 2017, while townhouses and condos made significant gains in values from 2015 to the middle of 2018.
The East Vancouver housing market is an early indicator for the general health of the housing market in the lower mainland of Vancouver. Total home sales may have reached its lowest level after suffering lower sales for 2.5 years.
Detached home prices had dropped about 8% compared to a year ago, and the outlook is not good for a quick turn around. The price gain for detached homes from 2013 to 2017 was an impressive 196%. The price decline for detached homes on the way down, if it is a moderate decline, could take the current price level lower by another 10% to 15%.
Townhouses and condos had so far suffered about 2% drop in value, compared to the previous month. Their prices were still about 2.5% higher than a year ago. However, if market sentiment continues to deteriorate, the lack of buying interest may result in townhouse and condo prices dropping 5% to 10% from current levels.