Single homes in Vancouver nudge mark where prices can fall: board

Home sales across Metro Vancouver tumbled last month, when compared with May 2017, and the Real Estate Board of Greater Vancouver says the drop in sales raises the potential of lower prices for some home types.

The board says 2,833 properties sold in its region in May, a 35.1% plunge from sales recorded in the same time last year, although May’s sales were up nearly 10% over transactions in April.

Read: GTA home sales down 22% in May, but prices remain strong

A news release from the real estate board says sales in May were 19.3% below the 10-year average for the month.

Board president Phil Moore says low sales and a nearly 10% jump in the number of newly listed properties between April and May has pushed selection to its highest level in two years.

Moore says supply is still below the 10-year average, but when the total number of single detached home sales is divided by total listings for that type of property, the ratio is 14.7, nearing the indicator where downward pressure on prices can occur.

The sales-to-active listings ratios for townhomes and condominiums are higher, at 30.8% for townhomes and 41.7% for condominiums, well above the 20% mark that the board says can trigger upward pressure on prices.

“For home sellers to be successful in today’s market, it’s important to price your property competitively given the shifting dynamics we’re experiencing,” Moore says in the release.

The composite benchmark price for all residential properties in Metro Vancouver is $1,094,000, an 11.5% increase over May 2017.

Sales of detached properties across Metro Vancouver fell 40.2% in May, compared with May 2017, while the benchmark price was set at $1,608,000, a 2.4% increase year over year.

Sales of condominiums and townhomes also dropped last month when compared with the year before, down 29.3% for condos and 39.8% for townhomes.

The benchmark price for condos was up 20% to $701,700, and townhomes jumped 16% to $859,500 over the same period, but the board says price increases for both types of properties have remained under 1% since April.

Study suggests a supply-side approach to housing policy

A study on Vancouver housing prices from the UBC Sauder Centre of Social Innovation & Impact Investing summarizes several reports on the forces affecting home prices in that city, as well as across Canada. The reports show that government intervention in housing policy tends to focus on reducing demand, e.g., through tax increases, instead of improving supply conditions.

Such demand-focused policy has had limited impact on house prices to date, and has negative consequences, says the study.

For example, “It is possible that higher marginal taxes on single family homes above $3 [million] will actually increase the price of condominiums and townhomes in the region as they become the affordable option,” says the study.

Further, the government’s demand-side approach is based on capturing higher tax revenues from growing property values, and then directly investing those revenues in social and affordable housing.

“The failure to consider legislation that will improve supply conditions ultimately means that the cost of delivering on those government targets for social housing will be higher, since the underlying land values will remain high and competition for labour will be increased, unless there is a significant regional slowdown in construction,” says the study.

In comparison, focusing on supply-side policy, such as implementing measures to improve density and reducing regulation costs, seem to have little downside, says the study.

Read the full report.

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