September was an important month for the Vancouver real estate market as new mortgage rules have been announced.
The key impacts of the new mortgage rules are
Lower borrowing power for buyers, specifically those with 20% down but also those who may need to qualify on a program that banks require to be insured, even if you have over 20% down (like self-employed programs, small square footage units, small towns, etc.)
Assuming the median income of $76,000 per year, the maximum borrowing power for someone who used to be able to purchase a $500,000 property with 10% down now qualifies for about a $425,000 purchase
Assuming an income of $100,000 per year, the maximum borrowing power for someone who could purchase a $700,000 property now qualifies to purchase around a $550,000 purchase.
Overall, a decrease in borrowing power of around 15% – 20%.
In the Vancouver real estate market June through August showed a significant reduction in monthly absorption rates (number of sales to active listings). September data indicates that the single family detached house sales remain sluggish with Vancouver East, West and West Vancouver being a buyer’s market. North Vancouver has the best performing market, with sales to active listings ratio of 17% which indicates a balanced market.
2106 Monthly Absorption Rates
Detached Single Family Houses
| Area | May | June | July | August | September |
| Vancouver West | 36% | 27% | 18% | 11% | 10% |
| Vancouver East | 49% | 33% | 21% | 14% | 10% |
| North Vancouver | 65% | 82% | 11% | 8% | 17% |
| West Vancouver | 27% | 19% | 11% | 8% | 6% |
Absorption rate is calculated by taking the number of homes that sold in a month and divide it by the total number of homes for sale at the end of the month.
- 0-14% – Buyers’ Market
- 15%-20% – Balanced Market
- 21%+ – Sellers’ Market
The most active price range for sales in the Vancouver West Side, was 1.5 to 1.75 million with a 67% sales ratio. Vancouver East Side’s most active price range for sales was 1 to 1.25 million with a 38% sales ratio and the best performing sub areas were Grandview, Hastings followed by Main. North Vancouver’s most active price range for sales was 1 to 1.25 million with a 67% percent sales ratio. West Vancouver’s most active price range for sales was 1.75 to 2 million with a 45% sales ration.
In the attached condominium and townhouse market, the sales to listing ratio remains a sellers’ market. Following the major announcement by the Finance Minister, the changes fundamentally impact the demand side of the supply/demand relationship. Over the past 7 years, market demand at the entry level and mid-level have been fueled by record low interest rates. The new regulations are the equivalent of a significant increase in rates. All insured borrowers must now qualify on the Bank of Canada posted 5 year rate of 4.64% instead of the reduced negotiated rate of approximately 2.5%. These changes are the equivalent of a 2% jump in mortgage rates. Early predictions are saying that first time buyers and low equity buyers in Vancouver may be forced out of the market. The new mortgage lending regulation comes into effect on 17 October 2016.
People with existing mortgage agreements and those who have their deal close prior to the October 17th 2016 deadline are not subject to the new regulations; they will have to have the mortgage funded by March 1, 2017. This may result in a buying surge for those wanting to avoid the new rules.
Condominium & Townhouse
| Area | May | June | July | August | September |
| Downtown | 86% | 95% | 53% | 42% | 37% |
| Vancouver West | 83% | 80% | 64% | 51% | 40% |
| Vancouver East | 92% | 100% | 100% | 89% | 65% |
| North Vancouver | 100% | 100% | 88% | 62% | 61% |
| West Vancouver | 89% | 49% | 36% | 41% | 29% |
The most active price range in Downtown was in the 300,000 to 400,000 range and in the 1.2 to 1.5 million dollar range. The most active sub area was the West End with the majority of sales being 1 bedroom suites. The West Side of Vancouver most active price range for sales was 400,000 to 500,000 range with the majority of the sales being 1 bedroom suites in Fairview and Kitsilano. Vancouver East Side’s most active price range for sales was 300,000 to 400,000 in the sub areas of Grandview, Hastings East and Collingwood. In North Vancouver, the most active price range for sales was 300,000 to 400,000 in the sub areas of Hamilton and Roche Point. In West Vancouver the most active price range for sales was 1.2 to 1.5 million dollars in the sub area Ambleside.
In summary, the condominium market remains a seller’s market but the new mortgage regulations coming into effect on 17 October 2016 could have a significant negative impact. The detached housing market remains slow and a buyer’s market except for a few key price ranges as previously discussed. The market still needs a few more months of data to accurately determine exactly where this correction is headed and the new mortgage regulations will only have a negative impact.
If you would like more specific feedback and data with respect to any property of interest please call or email me.