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Market Report

Vancouver Bounces Back

With Olympics Coming Up, International Buyers Help Fuel Region's Recovery

By Kevin Brass
Editor

When the Olympic flame enters BC Place Stadium on Feb. 12, the world’s spotlight will fall on one of North America’s hottest property markets.

In November more than 7,721 properties were sold in British Columbia, the highest volume for the month since 2005, according to the British Columbia Real Estate Association. And it wasn’t spurred by foreclosures and short sales; the Real Estate Board of Greater Vancouver’s housing price index for the area jumped 16.2 percent to $562,463, from a year earlier.

“We’ve seen a dramatic rebound in home sales,” said Cameron Muir, chief economist for the BCREA. Home prices have been on an uptrend for several months, “scratching record levels,” Muir says.

A few weeks ago, in a throwback to the old days, 20 buyers camped out over night in the cold to buy units in a Vancouver development called the Mark, a tower in the trendy neighborhood of Yaletown. In one day 163 of the 214 available condos sold, with units ranging from 460- to 730-square-feet priced between $320,900 and $660,900. (All figures in Canadian dollars; the current exchange rate is $1USD=$1.03CAD.)

International buyers are playing a “very significant” role in the upturn, according to Ross McCredie, president of Sotheby’s International Realty Canada. “Over half of the homes sold over $5 million in Vancouver sold to mainland Chinese,” he said. In West Vancouver, known as Vancouver’s most expensive neighborhood, there has been consistent activity from Middle Eastern and U.K. buyers, he says.

The bulk of the international buyers are making a lifestyle purchase more than a simple investment, taking advantage of Vancouver’s reputation as one of the world’s most livable cities, McCredie says. “They are not necessarily retirees, they’re just looking for a change,” McCredie said.

A few years ago 25 percent of condo buyers in Metro Vancouver were considered investors, according to tracking data by LandCor. Last year the number was closer to 8 percent.

“Speculators have never understood this market,” McCredie said.

The upcoming Olympic Games, local experts agree, has little to do with the recent surge. Low interest rates and pent up demand fueled sales, they say. Vancouver’s natural shortage of developable space also serves to artificially inflate prices, keeping Vancouver among Canada’s most expensive cities, even in down times.

Last year, prospective buyers held off buying, but jumped backed in as soon as the market started stabilizing, creating the recent flurry of activity, said Robyn Adamache, senior market analyst, Canadian Mortgage and Housing Corp.

Even for Vancouver, recovery in the property market has been much quicker than in past cycles, Adamache says. The regional unemployment rate is still relatively high at 7 percent, she notes. “It’s not the economy that has picked up so quickly,” she says.

But Vancouver’s property market is not dependent on locals. The region attracts a net migration of new residents of about 40,000 people a year—most of them from outside Canada, according to Canadian Mortgage and Housing data. China, Taiwan and India are the largest contributors, data shows.

In contrast, the number of U.S. buyers has slowed in the last year. Californians, in particular, are still struggling with the ripple effects of the housing crisis, industry executives say. But a pickup in buyers from Asia has more than compensated for the U.S. drop-off, Vancouver executives say.

Some compare the surge in Chinese buyers to the huge flow of money from Hong Kong in the ‘90s.

“We’ve seen a huge influx of buyers from mainland China,” said Dave Watt, a Realtor with Royal LePage and past president of the Real Estate Board of Greater Vancouver.

Most are doing business in the area or sending their children to school, and they’re buying in the $1 million to $3 million range, he says. In December, the Chinese government gave Canada “approved destination” status, which should increase the connection, Watt notes.

Outside Vancouver, British Columbia is a patchwork of different markets. Victoria is known as a retirement community, with a sunnier climate and year-round golf. Kelowna is a region of lakes, mountains and picturesque vineyards. Whistler is a classic upscale ski resort, known around the world.

In the last few months, the second home markets, in particular, have seen a jump in activity, analysts say, after a long slow period.

“The recession hit us worse than everybody else,” said Ursula Morel of Sea to Sky Premier Properties in Whistler and the 2010 president of the Canadian chapter of FIABCI, the International Real Estate Federation. “The higher the prices, the more you go down.” Most of the activity in the first half of 2009 involved fractionals, she says.

However, in the second half of 2009, Whistler sales picked up again, with 11 sales between $2 million and $3 million. “It’s not Olympics driven, but there is definitely more hype in the air,” said Morel, who puts “Home of the 2010 Olympics” in the subject line of all her e-mails.

Foreign buyers in Canada are typically required to put 25 percent down, which has helped provide a level of stability to many markets, with few debt-to-equity problems and little urgency to sell, Morel said.

Clearly buyers believe there are no more steep drops in the Vancouver area’s near future. In Vancouver a property recently sold for more than $10 million and two in Victoria sold for more than $6 million.

Vancouver is expected to see price increases of four to seven percent, according to local analysts. Royal LePage predicts a 7.2 percent jump in the next year.

“Everything is pretty hot right now,” said Pete Shpak, managing broker for Sea and Sky Properties’ West Vancouver office. “I’ve been in a few multiple offer situations, which wasn’t happening a year ago.”

But there is still an air of caution. Many believe the recent surge only reflects the pent up demand and once that dissipates sales volumes could slow. A jump in interest rates could also put a wrench in the recovery.

“The high end is still softer than it has been in past years, and that is largely the result of the economy crawling slowly out of recession,” said Muir of the BCREA.

But then there’s the wild card—the Olympics, sure to supply a non-stop, two-week stream of soaring images of Vancouver’s spectacular coastline and picturesque mountains. In many ways, it will be one long advertisement for the region.

“I think it’s going to be pretty amazing how many new eyes see us,” Watt said.

For more information on buying in Canada, click here.

Sample listings:

West Vacouver, two bedroom, 2,000-square-foot apartment with panoramic views, set in green belt. $1.39 million. Listing.

In Whistler, 4-bedroom, 3.5 bath, 1,850-square foot townhouse with hot tub, sauna, near main village. $1,995 million. Listing.

Resources

Real Estate Board of Greater Vancouver

British Columbia Real Estate Association

Canada Housing and Mortgage

Canada Real Estate Association

Olympics Site

Tourism Vancouver

*Photo courtesy Tourism Vancouver

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