Is There a Real Estate Market Crash in Vancouver & Richmond?


Blog by Arnold Shuchat | September 6th, 2016


I will try below to bring clarity to the most recent stories abounding in the media and the blogsphere of the impending or current, "market collapse".  I caution my readers and clients, that the media and blog publishers love the "juice" associated with humungus price reductions.  There will be efforts out there to show a crisis to generate interest in selling news.  Don't buy it for a second.  I say this without an interest or position to defend, only to get to the actual numbers and provide them to you.  I will not blog in the negative to attract a clientele that has not until this point had the gumption to take a position in local real estate.

I must observe that in all my years in real estate, starting in Montreal in 1986, I have witnessed quite a few downturns, in different economies.  Let's first start by looking at local prices using the Real Estate Board of Greater Vancouver's Housing Price Index.  It is based on an algorithm that attempts to generate average house prices based upon the typical house for a market.  It would not apply to mansions.  However, it can be localised by neighbourhood and if you find that your home is approximately the same value as the HPI numbers for a month, then you are most fortunate to have this index to assist you in determining the most receent market direction. Here it is displayed in graph form for the last 5 years.  You can scroll over the actual graph lines (for Vancouver West and Richmond to see the actual values):





You can just now start to see prices using the HPI levelling off in August.  After the imposition of a 15% Foreign Buyers' Tax, one might expect a pause in market activity.  But, at this point, prices have not yet fallen in any meaningful way, contrary to media reports and anecdotes.

From my experience, the expression "Bulls, Bears and Pigs" referring to market participants either being aggressively optimistic, cautious or greedy comes into play at or near market tops.   The pigs are the ones who if their neighbours sold for $2.5 million in early June, believe that their property should be listed in mid August after the market noise of taxes and horror stories of impending doom are transmitted, for $2.9 Mill.  The pigs will not quickly give up on their dream that their castle was never worth $2.5 mill to begin with.  Consequently, when they, who are only holding their property for investment purposes and do not need it to live in, don't sell it, they eventually panic and start the process of following the market down.  The trip down for media purposes is so exciting as the prices declines to its real value of around $2.3 mill and is likely to generate great stories of a rapid near 21% price declines and panicked sellers. The problem is, the property was never worth $2.9 and the $2.9 is really irrelevant to any of us who had a real clue about that property's value.

I have assembled a table of 10 metrics which I use to assist in market analysis and have reproduced them below.  They are: sales in units per month; listing inventory; the number of months that sales at the current month's rate needed to sell that inventory; the median listing days for properties until they are sold; the sales to active ratio, all of which are for any given month.  You can track the changes in the numbers from 2013 through August of 2016. (I caution you that the August numbers are low both because of the sudden pause in transaction activity and, the fact that about 50% of sales are reported late.)  The lastest month will usually be understated just after the end of month end.  To be safe, I would add about 50% of the sales in units to the existing numbers.  However, I am only reporting on actual data in hand.

In summary, there is a market pause in activity.  Prices have not materially declined so as to generate screaming deals. The investor class might panic more that the resident homeowners as they are the ones who most fear losing their gains whereas, most locals still worry about kids and school.  Investors buy larger lot older houses; locals buy houses with bedrooms and bathrooms and look for amenities and proper care of a property. Consequently, I forecast a greater adjustment in larger "builder lot" properties than for well kept average sized homes on average sized lots.  There will likely be trade up opportunities for smaller homeowners as this spread narrows, should the Foreign Buyer's Tax squeeze capital inflows into residential housing. As I posted in one of my recent blogposts, in one small area study, 73% of all listings for a particular investor class of property in South Arm in Richmond, were listed for the 2nd time in 2 years after selling once, while 18% of the listings were listed a 3rd time in 2 years after selling twice. 

It makes sense that as houses on the cheaper end of the spectrum moved up in price, fewer buyers could afford them. Consequently, the table below illustrates the changes in activity from July to August of 2015 and 2016.  Just look at the drop-off in sales as homes moved from the $900k-1.3 Mill category to $1.3-1.6 mill category. The more expensive price categories were less affected.

Richmond Single Family Homes Sales
Price Range Aug 2-31/16 July 1-31/16
<$1 Mill 0 3
1-1.3 Mill 5 20
1.3-1.6 10 24
1.6-1.9 8 18
1.9-2.2 2 9
2.2-2.5 4 9
2.5-2.8 3 3
2.8-3.1 4 3
3.1-3.4 1 0
3.4-3.7 0 1
3.7-4.0 1 1
38 91
Aug 2-31/2015 July 1-31/2015
<$900k 8 21
900k-1.3 Mill 74 82
1.3-1.6 32 35
1.6-1.9 24 30
1.9-2.2 13 13
2.2-2.5 6 4
2.5-2.8 6 3
2.8-3.1 3 0
3.1-3.4 2 0
3.4-3.7 1 0
3.7-4.0 0 1
>4 Mill 3 1
Totals 172 190

All Detached Property
Vancouver W Richmond Vancouver W Richmond
# Units in # Units in Months of Months of Median Median Sales to Sales to
 # Sales # Sales Inventory Inventory Inventory Inventory Listing Listing Active Listing Active Listing
Month Vancouver W Richmond Vancouver W Richmond Vancouver W Richmond Days Days Ratio Ratio
Jan-13 83 63 814 859 9.81 13.63 55 46 0.102 0.073
Feb-13 104 89 930 925 8.94 10.39 17 35 0.112 0.096
Mar-13 152 89 920 936 6.05 10.52 26 36 0.165 0.095
Apr-13 140 109 994 1020 7.10 9.36 36 53 0.141 0.107
May-13 188 127 996 1067 5.30 8.40 23 30 0.189 0.119
Jun-13 148 115 945 1032 6.39 8.97 24 41 0.157 0.111
Jul-13 129 146 954 1049 7.40 7.18 32 51 0.135 0.139
Aug-13 135 136 908 1003 6.73 7.38 37 55 0.149 0.136
Sep-13 152 129 974 1000 6.41 7.75 31 33 0.156 0.129
Oct-13 179 120 894 903 4.99 7.53 28 60 0.2 0.133
Nov-13 141 109 785 830 5.57 7.61 37 48 0.18 0.131
Dec-13 111 87 588 634 5.30 7.29 47 53 0.189 0.137
Jan-14 112 116 800 768 7.14 6.62 20 56 0.14 0.151
Feb-14 176 142 821 793 4.66 5.58 15 22 0.214 0.179
Mar-14 147 135 836 804 5.69 5.96 29 25 0.176 0.168
Apr-14 159 130 944 860 5.94 6.62 19 32 0.168 0.151
May-14 203 159 957 923 4.71 5.81 24 21 0.212 0.172
Jun-14 175 165 927 905 5.30 5.48 17 25 0.189 0.182
Jul-14 141 158 933 949 6.62 6.01 21 26 0.151 0.166
Aug-14 126 133 901 890 7.15 6.69 37 38 0.14 0.149
Sep-14 171 152 907 862 5.30 5.67 18 40 0.189 0.176
Oct-14 157 165 825 780 5.25 4.73 27 41 0.19 0.212
Nov-14 115 130 738 689 6.42 5.30 31 31 0.156 0.189
Dec-14 98 107 557 530 5.68 4.95 36 59 0.176 0.202
Jan-15 102 118 657 614 6.44 5.20 14 37 0.155 0.192
Feb-15 167 164 826 661 4.95 4.03 11 14 0.202 0.248
Mar-15 211 228 811 640 3.84 2.81 15 18 0.26 0.356
Apr-15 219 250 802 634 3.66 2.54 14 15 0.273 0.394
May-15 208 225 765 622 3.68 2.76 13 13 0.272 0.362
Jun-15 236 240 702 636 2.97 2.65 18 13 0.336 0.377
Jul-15 155 217 721 626 4.65 2.88 20 16 0.215 0.347
Aug-15 148 181 691 618 4.67 3.41 15 17 0.214 0.293
Sep-15 125 174 739 612 5.91 3.52 18 17 0.169 0.284
Oct-15 164 194 659 519 4.02 2.68 13 16 0.249 0.374
Nov-15 165 191 575 454 3.48 2.38 32 18 0.287 0.423
Dec-15 134 178 413 314 3.08 1.76 24 22 0.324 0.567
Jan-16 134 163 523 349 3.90 2.14 15 10 0.256 0.466
Feb-16 224 204 623 460 2.78 2.25 9 10 0.36 0.443
Mar-16 221 257 610 530 2.76 2.06 13 9 0.362 0.485
Apr-16 229 210 628 588 2.74 2.80 12 10 0.365 0.355
May-16 190 208 622 687 3.27 3.30 12 11 0.305 0.304
Jun-16 153 172 671 781 4.39 4.54 12 15 0.228 0.22
Jul-16 108 124 685 845 6.34 6.81 14 20 0.157 0.147
Aug-16 63 64 643 846 10.21 13.22 18 19 0.098 0.076

There is no doubt that in light of the unexpected drop in the number of people willing to pay the high prices of our spring market, and due to the imposition fo the new Foreign Buyers' Tax, the sales to listing ratio has declined substantially to make it appear that we are now likely to be in a buyers' market.  However, the sellers who do not have to sell will remove their listings and the deals that go through will seem great based upon price reductions from "pig" listers. However, I do not see the market giving back all but the most token of the real gains of 2015-2016. I estimate this amount to be 10-15% off the prices that never were achieved.