The market for detached homes may have cooled when compared to last year, but on the other hand, Vancouver’s condominium market has seen double-digit percentage increases from last year.
What is responsible for this year’s super hot condo market? A perfect storm comprising of three competing sectors:
First Time Buyers
Normally, a condo is what the typical homebuyer would invest in when entering the real estate market for the first time. During the past few years there has been a lot of dissent among first time homebuyers complaining that housing was becoming more and more unaffordable. Enter the provincial government with their BC Home Owner Mortgage and Equity Participation Program aimed at helping first time homebuyers with their down payment.
Instead of alleviating the problem of rising prices, the program is partly responsible for exacerbating it: with more potential buyers entering the market, there is upward pressure on prices, as supply cannot keep up with demand.
It is not surprising that first-time homebuyers are feeling that the condo market is now passing them by. Currently, each listing gets at least 4-5 offers and the final price is usually tens of thousands over asking.
Speculators have also helped push up the average price of a Vancouver condo.
Research finds that roughly 5% of the condos sold in 2017 were owned for less than 1 year and nearly 11% sold within 2 years.
In any market where there is a potential for short-term profit, there are investors who find this a very hard opportunity to pass by – simple market economics.
However, not everyone who bought intended to flip. Many recent buyers have seen the value of their condo shoot up within a short period of time.
Finding the short-term windfall too hard to pass by, they have subsequently sold and made huge profits equivalent to a year’s wages, in some cases.
In the past few years there have been defectors from the detached market who have taken advantage of the property boom and sold their homes for huge gains. Many are boomers who have moved out of the area to other parts of the province looking forward to a comfortable retirement.
And there are those who are close to retirement, but have sold early in order not to miss on this housing bonanza. Armed with cash and patience they have chosen to downsize into smaller and more manageable homes – condos – putting even more pressure on prices and availability.
These three competing forces have forced the condo market to explode and there are no foreseeable signs that this segment will cool down.
If you are looking to purchase a condo in this super hot condo market, we have a number of condos available in our listings. Go to the VLIST search and browse through the listings.