Joanne Lee Young on Nov 4, 2016 12:13 AM
It’s an eye-catching but perhaps unsurprising development, as buyers are being forced out of pricier markets and are starting to consider smaller, cheaper properties in the wake of new federal lending rules.
Home sales for all kinds of properties in Metro Vancouver slid 38.8 per cent in October compared to a year ago, and some prices are showing signs of falling. In the Fraser Valley, it was a similar story of decline for all properties, with a milder drop of 17.4 per cent in October sales.
In particular, sales of single-family homes in the city and suburbs have dropped sharply, and this has also been the case in the Fraser Valley where there was a 45.3 per cent drop in detached home sales — from 937 in October 2015 to 513 a year later.
But when it comes to Fraser Valley townhouses, sales gained 10.2 per cent. For condos, the jump was 56.3 per cent, from 256 in October 2015 to 400 a year later.
In Abbotsford alone, townhome sales gained 19.5 per cent over a year, while condo sales soared 84.8 per cent, from 46 in October 2015 to 85 a year later.
“One of the main things is that buyers have lost some of their buying power, which has been hurt with the changes made (to mortgage lending) on Oct. 17,” said Langley-based realtor Alistair Young.
The new rules, designed by Ottawa to cool the housing market, require that homebuyers qualify for the posted rate for a five-year term, which is currently 4.64 per cent — meaning the buying power of some homebuyers will be reduced.
Ben and Vivi Schulz, parents of a seven-month-old baby, were looking for a bigger home and wanted to buy a townhouse in Port Moody. They were able to sell their one-bedroom condo in Langley’s Walnut Grove two days before the lending changes came into effect — but then didn’t have time to buy and could only qualify for a mortgage that gives them about $85,000 less buying power.
“We were actually frantically trying to find something before the changes, but we had only sold the condo two days before,” said Ben Schulz. Their bank agent “had given me a heads-up that if we wanted to go for the price range we had initially been approved for … but in the end, it was too rushed.”
The adjusted mortgage was still enough for them to buy a townhome with more space, but in Langley and not Port Moody.
“Folks who previously had more money to spend on a detached home or a townhome are now relegated to buying a condo,” said Young. “If they don’t have 20 per cent down, then they could be out as little as $50,000 or as much as $150,000.
So, for example, said Young, “somebody who previously could have bought a house for $640,000 now has to buy a townhome for $450,000, and they are not happy about it. There are strata fees. There’s no yard. There are rules and you don’t have the independence of being in your own house.”
This is “buoying up the lower market” of condos, especially the sale of those in the $200,000-$300,000 price range, said Young. “That is the most active price band.”
“There aren’t many townhome options under $350,000 these days so anything that comes onto the market in (that) range will likely be snapped up pretty quick,” said Michael Ferreira of Urban Analytics Inc., which collects real estate data.
“We’re also seeing that the higher townhome prices combined with the loss of buying power for the more price-sensitive buyer groups has driven these buyers to wood frame/low-rise condo product, which tends to be more affordable.”
Ferreira said there are 19 townhome projects throughout Surrey, Langley and White Rock “that could be in a position to launch in the next six months with a total of just over 900 units. To put this into context, there were 2,042 town home sales in these three sub-markets in the first nine months of this year.”
The more recent October sales numbers for townhomes and condos in the Fraser Valley reflect “a quick reaction to the new lending changes. There’s no way around it,” said Young.
Credit: Joanne Lee Young
October 5, 2016