I remember a short 4 months ago, pessimism was the consensus for the local (BC) real estate and predictions were made for 30,000 of inventory by 2009 Summer. Now, you see listings getting multiple offers with prices over the asking and deals made within a couple of days on the market. What has changed?
To answer the question, we must first understand that the population and housing count in Vancouver are pretty much fixed. Immigration has been slowed so there has not been as much population boost as the past couple of years. So our situation is that there is a significant increase in housing stock above what population growth can fill.
But data has shown that inventory has dropped compared to last year. Sales in the past 3 months have been climbing and not showing signs of slowing. The low interest rates have prompted people to become home-owners using their properties to generate rental income. Others just want to hop on the wave.
This brings us to the underlying problem: the number of landlords and renters must balance. That means, effectively, for every landlord, there must still be a renter available to fill the property. With more and more people shifting from being renters to home-owners, the balance will be disrupted.
Let’s not forget we are in midst of an economic crisis. Lack of job security, lower wage and credit crunch all put rents under pressure. As securing rentals become more and more difficult, the demand for home ownership will decline. Ultimately the utility provided by housing, in the form of the rents, is all that backs prices.
The current real estate market activities are not backed by fundamentals which is a clear indication that it is driven by speculators. People keep telling me that the market is hot AGAIN. I tell them to cool down.
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