Property Investing in Downtown Vancouver- Is Now a Good Time?

Mar 16, 2020 | Interest Rates, Market Updates, Selling, Vancouver

A change in the seasons is upon us, and property in downtown Vancouver is entering a traditionally good period for the market. With global events leading to lower interest rates, the Vancouver property market is also heating up, as opportunities for better finance become available. Rather than reacting to recent events, however, we’re zooming out and taking a more macro view of the market, so you can decide if now is a good time for you to invest.

Why Is a Macro View Important?

As real estate professionals, it’s our job to extrapolate the current data and market conditions to help you to make more informed decisions. The choice to purchase, or sell, property is and always will be your choice. However, we wanted to sort through some of the available information, to bring you a calmer analysis of the situation, and help you decide whether now is a good time to invest in property in downtown Vancouver.

Case Study: Property Market in Vancouver

For almost 20 years, properties in Vancouver have appreciated in price. Driven by population growth and demand- both locally and from overseas- government intervention has recently become the only thing ensuring affordable housing options still remain.

Moreover, although the market was hit in the 2008 global financial crisis, it had a relatively soft landing, quickly recovered, and went on an almost decade long bull run. This sustained appreciation peaked in July 2017 (for the wider Vancouver area), and has since been in a state of correction- a flow-on effect from new policies, and a very healthy part of all market cycles.

The graph below shows the MLS® HPI pricing chart, which tracks relative price levels by comparing price levels at a point in time to price levels in a base (reference) period. This figure gives us a better overview of market trends since 2005 (pre-GFC), based on pure inflation/deflation, as opposed to the median sale price.

As you can see, there has been a gradual increase in property value since 2009, and even with the recent correction, property values have still risen by almost 100% since 2014.

Narrowing it Down: Property in Downtown Vancouver

In the past few months, buyers have returned to the Vancouver property markets as low-interest rates and investor confidence has begun to rebound, and more properties become available. This has been reflected more strongly in Downtown, as buyer demand continues to increase.

Moreover, when we look at specific locations for property in downtown Vancouver, we can see that traditionally- we are entering a strong period for both sales and demand. For example, we recently analyzed property data for Yaletown, and confirmed that even with the recent market correction, on average, the value of property still increased in spring for the district, and in Vancouver as a whole.

Since the start of the year, the property market has been hot. Data shows that property values and figures are on the rise. There are a number of reasons for this:

  • The seasonal appreciation we tend to see around this time of year

  • New opportunities afforded to us by a low-interest-rate environment

  • The market has had two years to adapt and rebound from the recent mortgage stress test, coinciding with the price decreases we saw across 2018 and 2019.

With Every Challenge Comes Opportunity

Recent data has shown the markets are once again in an uptrend since the 2018 lows, and by taking a macro view of the current economic climate, we can better analyse where the opportunities lay, and help you to make informed decisions.

However, we need to preface this with a simple statement- nobody knows the future. No one can truly predict when markets will rise and fall, by how much, or any other attenuating circumstances that may contribute to these fluctuations.

In addition, it would be remiss of us to not consider the effects of COVID-19, however, we also acknowledge that all of the current panic may just blow over in the coming months.

Early indications would suggest that the recent interest rate cuts have had their desired effect on property markets, and we have already seen markets begin to climb in 2020. If COVID-19 continues to slow global economies, we could see these rates become even more attractive, creating what many would call a ‘jubilee’ year for investing in property.

Couple this with the potential for mortgage stress it may create for some households, and the likelihood of foreclosures also becomes more apparent. For investors, these circumstances may present a never-to-be-seen-again opportunity- particularly in downtown neighbourhoods, which represent some of the most popular and sought after properties in the city.

Where Do the Opportunities Lie?

With every market cycle, there are new opportunities. In stable economies, however, it’s an opportunity that doesn’t come around very often. So, taking into account the possible effects of COVID-19, let’s take a look at where some of the opportunities lie.

First, if global economies continue to slow, loan defaults become more likely. Whilst this isn’t the best outcome for everyone, it does lead to some incredible buying opportunities as banks attempt to recoup the remainder of the loan, rather than the full value of the property. In a low-interest-rate environment, and on the back of a 10-year bull market, your opportunity to take advantage of these circumstances has just increased.

Second, recent legislative changes (coming into effect April 6) have lowered the level that you must qualify for in order to get an insured mortgage, which may serve to increase your borrowing power.

Third, if this virus or other economic impacts affect the market- we may even see interest rates go into the negative. While this concept may be hard to comprehend, if it comes to fruition it is also likely that some very serious economic incentives come into play to help you enter the market. Things such as increased first home buyers grants or other property tax credits. In some cases, we may even see banks pay you to take out a debt position.

Typically, when th
ese ‘black swan’ events play out, the effects are felt across all industries for a minimum of 12-18 months. Although the 2008 GFC saw a decline in Vancouver property prices, it was followed by the strongest property bull market in our recent history.

Those that are able to refinance may be looking at a once in a lifetime chance to acquire and invest in property in downtown Vancouver, ahead of another strong bull market. Furthermore, borrowing against the equity that you have gained over the past decade of appreciation, may present a real investment opportunity for you.

Is Now the Right Time to Invest in Property in Downtown Vancouver?

Low interest rates are seeing an increase in purchasing across the city, and as it stands the Vancouver property market is currently in an uptrend. Add to that the fact we are entering Spring- which usually sees property values appreciate- and these market conditions have created the perfect seller’s market.

So far in 2020, it’s been a strong seller’s market for condos under $1M and for houses under $2M, and there are bidding wars happening everywhere in these segments. The current demand is also a result of lower supply, and the ability for households to borrow more at lower interest rates, adding to portfolios and refinancing to take advantage of this environment. As to whether it’s a good time for you to sell or invest- that is and always will be your decision.

If you are considering selling your condo, or the possibility of acquiring another- we’re here to help! As industry experts, it’s our job to help you find the right investments and make the right choices now, for potential gains in the future. To see how our team at the West Haven Group can help, or for up to date market information, reach out and connect.

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