Sunny Skies Are Here, But Be Ready for Rain
A colleague turned to me during a recent review of Vancouver real estate markets and quipped, “Do you really think prices are going to crash in Vancouver? Just take a look outside today.”
The skies were clear, and the city sparkled as sunlight danced off the harbour and cherry blossoms along the Seawall. Really, how could property values ever go down in such a spectacular setting?
All cycles end
Well, it’s happened before. While the economy in Vancouver remains robust, there’s also been plenty of hand-wringing about government intervention. You can’t blame efforts to moderate the market, but the unintended consequences have a lot of people feeling anxious. Perhaps the biggest concern is not a decline in housing prices, but the erosion in people’s purchasing power.
While government has worked to cool demand, a lack of supply has kept prices rising. Policies designed to cool demand have also limited the purchasing power of many first-time homebuyers. Many face greater scrutiny when they seek bank financing. Recent increases in posted lending rates have chipped away at purchasing power, leaving homeowners – absent help from the Bank of Mom & Dad – able to afford 15% to 20% less than a year ago.
While everyone thinks about the poor, priced-out homebuyer, what does that mean for you, a homeowner looking to sell? Has your nest egg cracked?
Little to fear
A glance at the latest Real Estate Board of Greater Vancouver statistics indicates that most people have little to fear.
The benchmark price for a Westside house has inched down marginally over the past year, a good sign that most properties have held their value. Prices for townhouses and apartments have increased, dramatically – 10.1% and 16%, respectively. This suggests that there are still buyers out there keen for Westside real estate. And let’s face it – a Point Grey house isn’t the starter home of choice for most first-time buyers – they’re more likely to opt for a Kitsilano condo, or something further east. This means the buyers looking at your home are likely to have solid equity, good banking relationships and fewer restrictions.
Know what to expect
This isn’t to say there isn’t downward pressure, of course. The talk about falling prices may lead some buyers to expect a better deal than currently exists. It pays to anticipate this pressure. On the one hand, make sure your property can justify the list price (this is where Ken can help make sure the price is appropriate).
On the other hand, run your own calculations so you’re in touch with the market and not dreaming about what people can afford. It’s better to anticipate when you may need to shave two, five or even 10% from the value of your property. With townhouses and apartments rising by an average of more than 60% in the past three years, it won’t hurt to give up just a little bit of the gain if it helps you close a deal. (Again, Ken will help you find the right price for the current market, whether your selling or buying.)
The take-away? Being aware of market conditions will help you protect your nest egg when downward pressure on prices comes. Working with a trusted professional will make sure you get the best price possible. But for now, your nest egg hasn’t cracked.