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BLOG: Michael Ferreira at CanaData West

0 112 Economic

by JOC News Service

Ferreira said he would focus on the multifamily side of the housing market as that is where activity is focused in Metro Vancouver. Ferreira termed 2016 "one of the craziest years ever" in the Vancouver real estate market, with unprecedented sales and anemic supply, as well as rapid price escalation and government intervention.
BLOG: Michael Ferreira at CanaData West

The primary difference between the urban and the Fraser Valley markets (where there was also a rise in sales) was the size of the project, with Vancouver projects generally at a larger scale.

Burnaby has been the most active in contributing new housing, with Vancouver close behind. Vancouver is larger and "should be leading the region by far, given its size" Ferreira said.

The multi-family home market in the outer suburbs consists of "line ups and lots of sales" with the 'downsizer' age cohort the biggest buying group.

Projects were being bought faster than new homes could come to market, which led to a rapid escalation of prices, he added.

Prices increased up to 50 per cent in the suburbs from 2015 to 2016 in the outer suburbs and supply dropped 57 per cent. The highrise sector of the outer city centre, concentrated in Surrey city centre has been softer than expected and has primarily been driven by investors.

In the inner suburbs, there are also more line ups and more sales. There was "incredible demand for townhomes, due to lack of supply," Ferreira said. The Evergreen Line is also starting to have an impact to push sales upward.

The Brentwood redevelopment, which is well underway, has pushed sales in that area of Burnaby, Metrotown was quiet through the first nine months of the year, but the Station Square Towers 4 and 5 went on sale in late September, with 306 of 334 units sold in Tower 4 and 350 of 423 suites sold in Tower 5.

In the inner suburbs, a big drop in supply has led to a price rise of about 50 per cent.

In Vancouver, there is a need for more townhomes, more low rise and more product generally, Ferreira said. Over 3,200 units were sold in 2016.

"We need to do something about affordability besides taxing everyone more. We really need more supply in the market," Ferreira said. Supply was down 57 per cent, with the price rise in Vancouver up 50 per cent from 2015 to 2016.

Demand drivers include "cheap money" as the mortgage rates are quite low, and "it's really been the only thing that's allowed a lot of people to get into the housing market," he said.

International immigration has also been a big contributor, especially in the higher-end part of the market. China's banks lent so much money during the 2008 crisis that trillions of dollars flooded into the market, meaning much debt has been amassed but also money is available for overseas purchases.

"When this much debt is amassed in a country, it generally doesn't end well," Ferreira noted, but in the meantime massive amounts of money are available and many Chinese aren't comfortable keeping their money in China. Melbourne is experiencing much the same investment in property as is happening in Vancouver.

The wealth transfer has been massive, with 193,000 homes owned clear title by 55+ residents, and $197 billion in tax free equity.

Interprovincial migration is another factor, with former B.C. residents coming back to the province, as well as Albertans moving to B.C. for jobs.

Ferreira addressed government intervention in the market as "attacking demand" as opposed to responding to the need for new supply by increasing permitting and approvals. There was little consultation regarding the foreign buyer tax, he said. He also said it was 'unconscionable' of the government to not grandfather in sales that were already in process.

The impact of the foreign buyer tax was that there was a slowdown in the third quarter, but "some of the froth came off the market," he said.

Stricter mortgage rules also amounted to "attacking buyers who've contributed least to the housing crisis, but are most impacted by it," he said.

The vacant home tax is also 'purely political,' Ferreira said, and will add nothing to the supply on the market.

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