I just received the Landcor Data Corporation's quarterly synopsis of the BC Real Estate market and here is what they have to say:
Residential sales have mixed results, again
As many would expect, the first quarter of 2008 (Q108) has seen residential property sales in British Columbia drop in number of sales but increase in total sales value, much like the first quarter of 2007 (Q107).
This continued market trend is the result of a cooling off period in the BC residential property market.
2008 First Quarter Residential Property Sales Results - Introduction
Three regions up, three regions down
Currently, the market is seeing an increase in inventory, with properties sitting for longer periods of time; but as the analysis in this report will show, three of the six regional markets in BC are seeing values continue to increase despite the decrease in number of properties sold.
Looking at the 2008 first quarter results at a regional level, Greater Vancouver and the Okanagan, followed by the Kootenay region as a distant third, continue to see an increase in the total sales value of residential properties compared to the first quarter of 2007. What is interesting is that in the Vancouver Island, Fraser Valley and BC North/Northwest regions, the total sales value has declined in the first quarter of 2008, compared to Q107. This is the first Q1 sales value decrease for all three regions in the past 4 years (please note, this finding is based on examining Q1 sales statistics from Q1 2004 - Q1 2008 only).
Out-of-province buyers stay home
Residential property purchases have declined in the first quarter of 2008 for many reasons, one of which appears to the decline of interest from buyers from outside of British Columbia, namely those from Alberta and the United States. The number of buyers from Ontario is comparable to levels seen in the first quarter of 2007, however these purchases account for nearly half of the total value attributed to Ontario buyers in Q107.
The suspected downtown has arrived, but there is no need for alarm After years of historical highs, the market is simply correcting. In 2001, there were 90,704 residential sales, totalling just under $19 billion. Last year the market dipped for a second consecutive year to result in approx. 158,000 sales, but broke another record with a total value of approx. $62 billion. The first quarter of 2008 saw 26,860 residential properties trade hands, totaling $11.695 billion. On average, first quarter sales account for approx. 19% of annual total sales. Using this as a guideline we can expect to see 2008 total sales of over 140,000 transactions for a total value of over $61 billion. This would lead us to expect 2008 total sales counts to reflect 2004 levels, and a total value of sales similar to 2007.
Here is what I found interesting:
- A continued denial that the BC Real Estate market could be entering a period of substantial price declines.
- No recognition of the amount of speculative activity in the real estate market.
- No recognition of the ridiculous level of income required to purchase a home.
- Out of province buyers accounted for approximately 5.5% of all real estate transactions in Q108 which is down substaintially from the 6.1% in Q107.
Have a read through and tell us what you find interesting. Cheers.
10 comments:
- A continued denial that the BC Real Estate market could be entering a period of substantial price declines.
This report just presents the facts (i.e. total sales activity and total sales value). There are no ‘denials’ in it at all.
- No recognition of the amount of speculative activity in the real estate market.
One first needs a definition and a way to track speculation. Any suggestions?
- No recognition of the ridiculous level of income required to purchase a home.
Again, this report was a summary of sales, not a detailed analysis of affordability.
- Out of province buyers accounted for approximately 5.5% of all real estate transactions in Q108 which is down substaintially from the 6.1% in Q107.
If anything, I think this is where you would give the report credit because it provided a lot of data on out of province sales. Nobody else provides or evaluates this type of data.
From the landcor report - "there is no need for alarm" - I'm glad you feel that way and I'm sure the captain of the titanic said the same thing to the passengers before the ship sunk!
Thanks for your comment Dave. I do give credit to the Landcor report for giving us some information on out of province buying activity - that is why I said it was interesting.
I think they do have more information about speculative activity than is contained in this report. By speculative activity I mean non-primary residence purchases with either no corresponding rental or a subsequent transaction within 18 months.
I know this report is not a comment on affordability but a statement pertaining to that obvious fact would be a sound recognition of the reasons for the current decrease in demand.
Further - on speculation - there is no prescribed definition that can be monitored via sales reports. You would need to survey all purchasers in order to get an accurate guage of speculation. Purchasers who buy because they'll 'be priced out forever' if they don't or 'investors' who buy condo presales with the intent of selling before or shortly after completion are clearly speculators.
Ben Graham said: "An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative."
From wikipedia: "Speculative purchasing can also create inflationary pressure, causing particular prices to increase above their true value (real value - adjusted for inflation) simply because the speculative purchasing artificially increases the demand. Speculative selling can also have the opposite effect, causing prices to artificially decrease below their true value in a similar fashion. In various situations, price rises due to speculative purchasing cause further speculative purchasing in the hope that the price will continue to rise. This creates a positive feedback loop in which prices rise dramatically above the underlying value or worth of the items. This is known as an economic bubble. Such a period of increasing speculative purchasing is typically followed by one of speculative selling in which the price falls significantly, in extreme cases this may lead to crashes."
By speculative activity I mean non-primary residence purchases with either no corresponding rental or a subsequent transaction within 18 months.
There is not way to track rentals of such purchases. However, sales of the same unit can be tracked. 18 months seems like a reasonable timeframe to me. Some people use 3 or 6 months though. I imagine the relative changes would be the same in all these timeperiods.
The 3 and 6 month speculative activity is still relatively low.
Landcor is owned by one of BC's largest recreational land owners. They purchase the residential property role from the BC government - and even ended up hiring the bureaucrat who used to run that office (Peter Barber).
It's an elaborate PR machine that manipulates and carefully positions real estate statistics to support the notion of ever increasing prices.
Ken, NIHO IS the largest landowner in the province.
They took a big chance by buying the role on the concept that people would pay money for a computer to tell them what a home was worth. It turns out it paid off.
I think they are a good reliable source of information. Plus Rudy has a lot of cool stories to tell.
They took a big chance by buying the role on the concept that people would pay money for a computer to tell them what a home was worth
I'd pay money for that too.
Unfortunately, the only way to tell what a house is worth is to sell it. Of course you can estimate a house's market value, which is what BCAA and appraisers also do. But I rather doubt these people have developed some magic algorithm which is superior to what the others use. Zillow in the US which claims to do the same thing has been pilloried for estimates which were way off base.
"The first quarter of 2008 saw 26,860 residential properties trade hands, totaling $11.695 billion. On average, first quarter sales account for approx. 19% of annual total sales."
We shall see how Q208 compares to Q108. I will hazard a guess that the average of 19% sales in Q1 will be a bit higher this year. Anyways I'm glad they brought up the 2001 numbers. It shows how low total sales value can go in real terms.
The other fascinating stat is around how little of the market is made of buyers coming from out of country, around 1% US and international combined by total volume, only about 20% of all non-BC buyers.
Because the international smart money knows full well what bad value BC RE is.
Province of fools.
Some recent info on 'speculation'. The number of flips is actually lower than most expect.
http://www.canada.com/victoriatimescolonist/news/story.html?id=3b1e88b7-dc12-4aca-b9bc-649bdb72623d
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