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Vancouver Real Estate & Mortgage Broker Update & Forecast – 2018

It’s not new news that the real estate market in the Greater Vancouver area is booming – outpacing Toronto and claiming the title of “most expensive real estate in Canada”.  Unlike the other communities in BC, Vancouver development is tough, as land availability is extremely limited due to the Oceans, USA Border, and Rocky Mountains.  Following standard supply and demand graphs, it’s easy to see how real estate prices are increasing at record setting paces.

Real estate speculation is also a large player in sky-rocketing prices, where real estate assets can be purchased (usually using a mortgage broker), and sat on relatively cost free and sold at a later date.  Speculation is especially prevalent in the condo and townhouse pre-sell market, where a property can be purchased 2-3 years before possession date for as low as 5-10% down, with the balance owed on completion.  This allows new developments to be purchased well ahead of time, for significantly less capital.  The Vancouver government also has no way to tracking how many times these pre-sells have changed hands, as only the owner at the time of possession needs to be disclosed – which is a major target of the CRA.

A final noteworthy driver of real estate prices is using real estate as a money laundering asset – first exposed and detailed by the Globe and Mail.  Money withdrawals are restricted in mainland China, and Chinese Nationalists are paying for expensive homes in cash, secured against assets in China – a lot of this cash is derived from illicit activities such as Fentanyl sales.

Home Price Index for Vancouver, 2018

Vancouver Housing and Lending Price Index

With the average home listing in Vancouver reaching $1,092,000 (April, 2018), the Government (both federal and local) has been taking a number of steps to help reduce the rate of real estate appreciation – with a desire to make housing more affordable for Vancouver residents.  These new rules trickle down to mortgage brokers, as they are aimed at reducing the size of mortgages, and leverage in general as Canadians are one of the most in-debt per capita countries in the world.

  1. Change #1 – (Federal) – Increasing mortgage approval criteria to limit borrowing.  Widely reported as “stress tests”, hopeful buyers must qualify at a higher rate then they are obtaining financing at.  Such changes are aimed at limiting risk of default by lowering the monthly mortgage payment.
  2. Change #2 – (Provincial) – Foreign Buyers tax.  Implemented in the summer of 2016 – you can see the slump in respective price values below.  Foreign buyers are subject to a 15% tax rate on any home purchases.
  3. Change #3 – (Provincial) – Empty Homes tax.  Any empty home will be subject to a 1% assessed value tax – which the city of Vancouver has indicated will be .
  4. Change #4 – (Provincial) – Money Laundering Crackdown – Special hit forces targeting money laundering – which identifies high risk areas such as real estate and casinos.
  5. Change #5 – (Federal) – Interest Rate Rises.  The Federal Government has increased interest rates several times already this year, and more raises are expected to continue.  Although inflation has been growing, warranting rate increases, the rate hikes are largely to keep pace with the USA – which has also been steadily increasing interest rates.  Interest rates are the highest right now since the financial crisis of 2008.

3 Year Vancouver Housing Trend - Increasing Mortgages


2018 Vancouver Real Estate Forecast

As 2018 continues on, we expect to see real estate in Vancouver plateau.  There are a number of developments scheduled, and Vancouver is consistently rated as one of the most desirable cities in the world to live in, renowned for it’s outdoor beauty, environmentally friendly, clean urban landscapes, and safety.  Compared to other world class cities such as New York, Paris, and Los Angeles, Vancouver is relatively under priced.

With the NDP currently elected and with control of the provincial government, we are more likely to see a protectionist approach with real estate, driven to make housing more affordable to the average BC resident.  The Federal government is also more likely to raise interest rates in the near future, which means you can expect a higher interest rate (and mortgage bill) per dollar borrowed versus times previously.

Analyst Expectations: Wait and See/Hold

2018 Vancouver Mortgage Broker Forecast

We expect to see Vancouver Mortgage Brokers remain busy for the remainder of the year, with a large amount of brokerage deals coming in the form of refinancing – as home owners rush to secure a new 5-year rate before they increase further.  We expect to see Vancouver mortgage brokers remain busy with new home financing as well, as applications are more likely to turn to a professional for approval assistance to stick handle through the new rules implemented by the federal and provincial governments.

Mortgage brokers are a large driver of new mortgage on boarding to lenders, and all mortgage brokers should be expected to closely follow special deals (both refinancing and approvals) as banks look to drum up business in their already slumping mortgage numbers (which we’ve seen happen from 2 of the big 5 Canadian banks already this month).  Mortgage brokers should also be mindful of alternative lenders, as declines are expected to occur at a higher than normal rates.  This article is provided by the analysts at Vancouver Mortgage, a very popular and well respected Vancouver mortgage broker.

Analyst Expectations: Ample Work – Majority Refinancing, Alternative Lenders, Limited Time Deals.

Noteworthy Vancouver Developments for Mortgage Brokers

Keeping tabs on new developments and their pricing/balance due requirements is always an advisable task for any good mortgage broker. A few of the new, larger developments in Vancouver are:

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