BC Real Estate starting to Fall in Price
BC Real Estate starting to Fall in Price. It looks like the Real Estate Bubble in B.C. is starting to pop. All over B.C. land prices, house, townhouse and now even condo prices are starting to crack. Less and less buyers and more and more properties on the market is the culprit. Threat of rising rates and foreign buying rules are threatening the future of the industry.
The association’s deputy chief economist, Brendon Ogmundson, says lower demand as a result of higher mortgage rates and stringent mortgage qualification rules, is bringing most markets around the province back into balanced conditions. He says although the supply of active listings in the province is on the rise. Inventory remains low by historical standards and markets like Vancouver Island and the Okanagan remain under supplied.
- 2.49 ac Lot Size
Real Estate Cycles
Over Supply is on the Horizon
Not only the supply of new home buyers is being challenged the supply of new units are being built everywhere. And I mean everywhere. There is not one nook or block anywhere in the lower mainland where you can see a tower or a new project underway. This to me is a serious future roadblock to the price rises we have been seeing.
Being around the construction industry in the 70s and witnessing the massive price rises year after year it is eerily similar. At that time the interest rates were rising along with inflation. Marry this with new housing construction being built everywhere the mountain came tumbling down. House prices crashed and interest rates soared and the recession of the 80s ensued.
Déjà Vu You
To me this situation today seems to be similar except on a massive global sale. I mean house prices all over the planet are soaring out into space. The debt bubble and the bond bubble which is closely tied to the real estate market is also at risk of exploding. The gas that’s going to come out of this just could blow the roof off everything.
Vancouver and all of B.C. are quite desirable areas to live. Many new businesses are moving here to take advantage of good taxes and proximity to the U.S. Markets. Also a large percentage of the immigrant flow is moving into B.C. which is helping to keep the market going. If this flow stops or even slows look out below. Flipping and buying and holding is also under scrutiny. This will also put a huge damper on demand.
Bad News If You Understand Real Estate Cycles
My brief explanation of real estate cycles wasn’t just an unrelated rant. The increasing synchronization means we’re seeing advanced economies hitting the same phase, at the same time. Investor demand is leaving vacant homes around the world, and cities like Toronto, Vancouver, and London can no longer sell to locals at these levels, at the volumes needed. We’ve likely just finished an expansion phase, and are seeing the first signs of hypersupply. Keep an eye out for falling prices around the world.
The increasing synchronization of real estate prices is great during a boom, a.k.a. an expansion phase. Money flows across borders, and the vast majority of middle class homeowners see paper gains far exceeding their wages. The big problem is that strength is also a huge vulnerability, leaving all countries at risk from shock from a single country.
You no longer have to worry about your neighbors paying their bills to kick off a collapse of your housing market. You now have to worry if someone 3,500 miles away bought too much house in your neighborhood. Economic shock to a real estate market in one part of the world, can now lead to a domino effect across the globe. Now we’re starting to see global hyper supply appear. Pop quiz, does anyone remember what comes after hyper supply?