During the 6 months leading to January 2017, average home prices in Vancouver city dropped by a hefty 18.9%, offering worried home buyers some relief, after a relentless climb through the first half of 2016. However, February’s data tells a different story.
We used data from the Real Estate Board of Greater Vancouver and from the Canadian Real Estate Association to investigate whether the cool-down affected the entire metropolitan area, which communities have had the greatest fluctuations, and whether the Vancouver real estate market is the only one in Canada that is going through these shifts. Full methodology is available at the end of the report.
City of Vancouver sales and prices tumble in January
Around this time last year, the average price in Vancouver was hovering around the $1,100,000 mark, after increasing constantly for 3 consecutive years. Prices continued to rise at an even faster rate throughout the second quarter of 2016, reaching a high point of $1,764,600 for a single detached home in July 2016.
This escalation prompted the local government to implement a 15% tax on foreign buyers. BCREA chief economist Cameron Muir explains that, even though sales had started to diminish before the tax, it led to a sharp downturn, and to an eventual 39.7% year-over-year drop in January 2017. However, it was only after the tax was implemented that prices began to go south, reaching as low as $1,168,700 in January 2017.
West Vancouver leads the area with biggest drop in prices
Looking at the evolution of home prices in Vancouver Metro communities, prices tend to follow the same pattern over the entire area. We used benchmark price data from the Real Estate Board of Greater Vancouver for this month-by-month analysis, because it is more accurate, and less prone to massive fluctuations over short periods of time. The data shows that the August 2016 – January 2017 drops, ranging between 1% and 12%, consistently affected communities around Vancouver, with very few exceptions.
Here are the top 3 most dramatic price changes in the area, during the 6-month period:
- West Vancouver – prices down 12%, from $2,774,000 to $2,436,700.
- Delta municipality – North Delta prices down 7%, from $808,400 to $754,700 and Tsawwassen prices down 6%, from $969,300 to $911,700.
- Coquitlam – prices down 6%, from $781,800 to $732,200.
Of the 3, prices in West Vancouver have recovered slightly in the past month, while North Delta and Tsawwassen are the only two suburbs in the Greater Vancouver Area where prices are continuing their 6-month descent. Coquitlam has shown a significant 2.2% upswing in benchmark prices in the last month.
In terms of net numbers, the effect of this long drop looks quite dramatic. For example, the 6-month price change in the West Vancouver market translates into a $337,300 decrease in the average home price. To put things in perspective, this is two thirds of what the average Canadian is paying for a home (the national average home price in Canada is $503,057).
Prices bounce back in February, highest M-o-M increase in Port Coquitlam
February was the first month in over half a year in which the market in the Greater Vancouver Area seems to have regained some traction. The benchmark price rose 1.18% month-over-month. However, prices are still down 9.8% compared to February 2016, and this might possibly be nothing more than the beginning of a seasonal upward trend as we head into spring.
A month-by-month overview of the Greater Vancouver Area shows good recovery, with greatest changes in Port Coquitlam:
- Greater Vancouver Area – prices up 1.18%, from $896,000 to $906,700
- Vancouver East – prices stable compared to January 2017
- Vancouver West – prices up 2.12%, from $1,184,800 to $1,210,000
- Port Coquitlam – prices up 2.98%, from $571,400 to $588,400
Here is a chart detailing all the Greater Vancouver Area market trends over the past 7 months:
Bowen Island and Pitt Meadows trends don’t match with the rest of Metro Vancouver
While the market was winding down in most Greater Vancouver Area communities in the second part of last year, some were still showing an increase in prices, particularly Bowen Island and Pitt Meadows. Even February data shows that these two communities continue to be a little out of sync with the rest of Metro Vancouver.
- Bowen Island prices took a 1% downturn in February, after constantly increasing between last October and January, from $792,000 to $830,200 (a 5% rise).
- Pitt Meadows prices have had a more unpredictable evolution, peaking at $556,900 in November; compared to August 2016, the benchmark price was 1% higher in February, at $558,800, with no changes from January to February.
Cassandra Ariken, expert agent and part of The Today Team, is confident that the Metro Vancouver real estate market is not only past its deflation, but headed for greater heights than ever:
“Yes, there are a few dips and peaks, but the natural curve indicates the continuous increase in average price over the years. Meaning, although we may have lows in the market, we will eventually (should history repeat itself) come out of that low and potentially reach higher.
We live in a region with mountains on one side and the ocean on the other; and at the rapid rate we are building, we are continuing to lose land. I truly believe last year’s market was just the beginning of the potential our region has to offer”, says Ariken.
Metro Vancouver market dip not seen in the rest of Canada
Vancouver real estate has been unique for years now, when compared to national trends. Even though house prices have been increasing across the board, with the average price up 3.5% year-over-year according to the latest statistics published by the Canadian Real Estate Association, price rises at the levels seen in Vancouver in the first half of 2016 were far above the national trend.
Comparing Vancouver to Toronto has traditionally been a good way to benchmark real estate trends. As prices in Vancouver were on a downhill spiral in the final months of 2016, prices in the GTA were skyrocketing. February benchmark prices in Toronto registered a spectacular 23.8% year-over-year increase, setting the market there on a very steep path.
“While February sales were up from the previous month in about 70% of all local markets, the national increase was overwhelmingly driven by an increase in activity across the Greater Toronto Area (GTA) and environs.” (CREA)
The reasons why the market in Toronto and the surrounding regions is heating up are classic low availability and high demand, as well as an apparent influx of foreign investment.
Considering that the average home price in Canada has already exceeded the CREA forecast for 2017, which was $483,500, the GTA seems to have taken over as the main engine for real estate market growth in Canada. It will be interesting to track the evolution of this market in the months to come.
We used the same metrics as real estate boards, which track benchmark prices. These offer a more accurate and stable perspective on local markets, by evaluating the average features and amenities of a home. Benchmark prices also cut out the extremes on the pricing scale within a market, extremes which can have a negative impact on the accuracy of both average and median figures.