Vancouver Housing Market Implodes: Average Home Price Plunges 20th The Market Is Devastated | David Stockman's Contra

a Corner

8/21/16, 22:07

Vancouver Housing Market Implodes: Average Home Price

Plunges 20% In 1 Month The Market Is Devastated

davidstockmanscontracorner.com/vancouver-housing-market-implodes-average-home-price-plunges-20-in-1-month-the-market-is

By ZeroHedge

August 20, 2016

By Tyler Durden
Three weeks ago, when we looked at the long-overdue sudden change in the Vancouver housing market, long a
receptacle for Chinese hot and laundered money, we found that as a result of the implementation of the 15%
property tax implemented by British Columbia (something we recommended over a month earlier), that the
Vancouver housing bubble has burst.
We concluded this based on anecdotal evidence by local real estate professionals: As a new dawn breaks in
Metro Vancouvers real estate market, realty companies and real estate boards are reporting the first anecdotes
of deals falling through as foreign buyers forfeited deposits on binding deals rather than pay the new
tax. Worse, if only for the unprecedented local housing bubble, and certainly better for potential local
homeowners who were locked out from the massively overpriced market, they report evidence of local
buyers withdrawing offers in expectation that the market will soften.
Less than a month later, there is also hard evidence to confirm this assessment. According to Global News,
evidence from realtors and MLS data is showing the Vancouver real estate market is in the midst of a major
slow down, with prices dropping and sales plummeting.
While August is typically one of the slowest months for real estate transactions, MLS sales data from the first
two weeks of the month shows what many have been hoping for during the last few years of escalating prices.
According to realtor Brent Eilers, using MLS listing data, there were only three home sales in West Vancouver
between Aug. 1 and 14 this year, compared to 52 during the same period last year. Thats a decrease of 94%.

Global News obtained MLS sales data from several key Metro Vancouver markets and found the number of
about:blank

Page 1 of 4

Vancouver Housing Market Implodes: Average Home Price Plunges 20th The Market Is Devastated | David Stockman's Contra Corner

8/21/16, 22:07

homes sold during the first two weeks of August in Greater Vancouver dropped by 85% on average. Richmond
experienced a 96% drop in the number of sales and Burnaby North fell by 95%. Vancouvers West Side, West
Vancouver, and Coquitlam also took major hits.
It appears that the Vancouver housing market has slammed shut.
Which is hardly a surprise: virtually everyone saw it coming, the only question was when. Eilers says hes been
warning of a real estate slow-down for at least a year due to the regions unsustainable and unsupportable
prices. West Vancouver, where he does a large part of his business, had a benchmark detached home price of
almost $3.4 million in July according to the Real Estate Board of Greater Vancouver.
The market in West Van is up 450 per cent since 2001. So is everyone making 600 per cent more income
than they were so they can pay their taxes and buy their houses? Of course not. So how is this inflation been
financed? By off-shore money and record debt. Precisely what we said at the start of the year when we first
heard horror stories about Chinese buyers paying cash, sight unseen, for any and every local luxury, and not so
luxury home.
It appears that it is not just the 15% luxury tax implemented on on July 25 that has burst the bubble: according
to Eilers sales were dropping even before the tax. According to the data, July was another slow month in West
Vancouver with only 44 sales, down from 80 in 2015. June saw 74 sales, also down from 102 the year before.
The pattern has left the market devastated, Eilers adds.
While it may be too early to make a definitive conclusion, after all while earlier this month, the REBGV released
its statistics for the month of July, saying the data showed the market had slowed down to normal levels, there
was still no official August data available, and thus no actual indication of the slowdown. Fortunately for buyers,
real-time data proves otherwise.
Zolo, a Canadian real estate brokerage, keeps track of MLS home sales in real-time and reports prices as an
average rather than the benchmark price used by the REBGV. It currently shows a major correction underway
in most Metro Vancouver markets. According to the website, the City of Vancouver currently has an average
home price of $1.1 million, down 20.7% over the last 28 days and down 24.5% over the last three
months. The average detached home is $2.6 million, down 7% compared to three months ago.

about:blank

Page 2 of 4

Vancouver Housing Market Implodes: Average Home Price Plunges 20th The Market Is Devastated | David Stockman's Contra Corner

8/21/16, 22:07

Still, it may be too early to call the time of death of the market. Its only slowing down at the top where there is
uncertainty, Zolo CEO Barry Allen said. And that uncertainty is diabolically dangerous, according to Eilers,
who has sold real estate during four different correction periods in Vancouver. When the market changes, it
typically changes over night or within a couple of weeks, but it often takes two to three months for everybody to
figure it out. Thats why it can be so scary, he said.

According to the realtor, often sellers have their houses appraised months before they put them
on the market, meaning in the climate we are currently witnessing, sellers are expecting to list
their homes at record-high prices, even though the number of sales and listings indicate prices
should be lowering.
Typically what happens when the market starts to flip is all the buyers go into hibernation and all
the listings come on. What are the odds on getting that seller to price his home at a fraction of
where the market is now? Its zero, Eilers said.
What causes prices to lower is urgency, anxiety, and fear, according Eilers. He says a climate
of financial overexposure, a treadmill of buying and selling and flipping homes, owning multiple
properties, and buying before selling will test how long sellers can hold on without selling in
desperation.

If the bubble has indeed burst, things are about to get very ugly. Eilers says that in the 1980 housing crash,
prices dropped by 40 to 60% within a year and took six years to recover. So your $2 million house became
$800,000 in five months. Theres a lot of economists and a lot of wise people that believe that our financial
structure is much closer to that structure from a corrections point of view, Eilers explained.
One thing, however, appears certain: the foreign money influx has stopped. Zolos CEO says the foreign
buyer tax has certainly stopped speculative buyers. This has caused many other buyers to take on a
wait and see approach, which has essentially frozen the market.
News of the foreign buyer tax has spread to China, where Chinese real estate website Juwai now promotes
other Canadian cities as foreign capital destinations. The website used to promote Vancouver as one of the best
places for wealthy Chinese to invest, but has now switched to publicizing Calgary and Alberta due to the tax.
Which means that while one bubble is bursting, another is about to start, even if it is smack in the middle of
Canadas bleeding oil patch.
That said, this is good news for ordinary Vancouver residents. NDP MLA David Eby says the tax has caused a
lot of people to hit the pause button on buying homes, but all those people might come back into the market
in September. Despite his reservations on how the tax was implemented he would have preferred an
incrementally-increasing tax he says a market slow down is good news.
A lot of people have said to me quietly that they hope there is a substantial housing crash.
Well, it appears they got what they wanted. Now the only question is what happens once Vancouver corrects
by 30%, 40% or more will the Chinese buyers stay away permanently or, like a good S&P500 algos, simply
BTFD. We will have the answer in a few months.
Source: Vancouver Housing Market Implodes: Average Home Price Plunges 20% In 1 Month The Market Is
Devastated
about:blank

Page 3 of 4

Vancouver Housing Market Implodes: Average Home Price Plunges 20th The Market Is Devastated | David Stockman's Contra Corner

8/21/16, 22:07

Copyright 2015 Subsidium LLC . All Rights Reserved.

about:blank

Page 4 of 4