Wow! We are in very peculiar Vancouver real estate market in 2011. I was talking with a property inspector the other day, and he said he has “never, ever seen such a busy January and February before!” When I talk with home stagers, they, too, say how busy they are. So, why is everything going crazy?
Well, let’s say it is only half-crazy (see March Market Update). Single, detached houses in certain areas (mainly the West side of Vancouver, Richmond, and the North Shore of Vancouver) are seeing a very robust market for high-end houses and building lots. But when we look into other sectors, such as condos, there is movement, but it is a much more balanced state, meaning that buyers and sellers have time to look around and negotiate on the deal. We are not seeing as many bidding wars for condos as for houses, but people are not giving away their homes either…
The real point that I think the public needs to understand is that, in essence, there are two markets: we have a domestic market, and we have an immigrant market, predominantly made up of people from mainland China.
Last year, different economic forecasts for 2011 that I evaluated were talking about 3% growth in Vancouver real estate — nothing really too crazy, a slow but steady market. In fact, Cameron Muer, the chief economist for the Vancouver Real Estate Board, said, “…the days of unbelievable price growth are behind us…”
So, what is going on? Was he wrong? Well, for the domestic market, not really, but the emergence of a strong immigrant market is another story.
You see, Canada has a very attractive Business Immigration Program. But a recent change to the rules for high-net-worth individuals moving to Canada might have something to do with market changes and price growth in some sectors of Vancouver real estate. This program now requires the individual to:
- show that they have business experience,
- have a minimum net worth of $1,600,000 (Canadian) that was obtained legally, and
- make an $800,000 (Canadian) investment.
Until recently, the Business Immigration Program required a minimum net worth of only $800,000 Canadian and investment of only $400,000.
What the market is now reflecting is a trend toward many high-net-worth immigrants becoming “developers,” in order to satisfy the new rules. This explains the high demand for older homes.
And then there are the rest of us. The condo market remains relatively balanced because many condos don’t cost $800,000, and you can’t really tear down just one condo and develop it. The “developer” types are less interested; and, thus, we have the tale of two markets…
According to the Citizenship and Immigration Canada website, their idea around changing the rules is for the investment to create jobs and help provincial economies grow. The irony of the government’s plan to create jobs is that many Canadians will not be able to afford the homes they are helping to build!