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September market commentary: Looking at the long view

Blog by Robert Matthews | September 12th, 2016

“We've sorted it.” That’s what a non-resident buyer viewing one of my condo listings mentioned yesterday when I asked him about the new foreign buyer tax. Other keen foreign buyers may no doubt structure their purchases to avoid the tax as well. After all, the essential reasons for Vancouver's attraction as a real estate haven haven't changed. And even a 15% tax may not be enough to dissuade those with a longer term view.

Consensus is that over time Vancouver area real estate prices will continue their upward climb, albeit much more slowly than we've seen. And when looking at the long view, a 15% premium today may be more than offset over the long term. Additionally, at least some foreign buyers have a strong multi-generational perspective on Canada. Buy a house here; get the children into school here to help facilitate their Canadian citizenship when finished school; then help the parents become Canadian citizens; then, over time, help bring other family members to Canada. What is a 15% premium now, when one has a many-decades perspective?

A sleeper to the south
The shock of the new tax, however, did bring our market to a relative standstill. Interest may have swivelled south, to Seattle. San Francisco and Los Angeles have long attracted the Asian market; now, Seattle is poised and ready to become a major player for Asian real estate investment.

In many ways Seattle is much like Vancouver was ten or twenty years ago vis-a-vis the foreign buyer market. Things may quickly catch up, however. Consider the perceived safety of US assets; the likely upside of the US dollar vs. most other currencies including our own; the perceived weakness of the Canadian economy due to low resource prices; the relatively low cost of Seattle real estate; the strong Seattle economy and exemplary job growth... All in all, Seattle is well worthy of consideration for real estate investment. Whether this is helpful or harmful for us here in Vancouver is up for debate.

(I recently read a thoughtful and well-researched comparison of the Vancouver and Seattle markets. Visit my Facebook page for the link. And, while you're there, feel free to like my page to stay up to date with news and views.)

seattle 8(1).jpg

Stay, or go?
As we head into the autumn season what to do if you're thinking of selling? Frankly, I believe you should get on with it. At this time we're seeing relatively little listing competition; additionally, the price trend - up or down - is not yet established. Although we're experiencing a "wait and see" feel to things right now, many people do have a need and desire to buy at this time. The many aspects and inputs of their lives that generate the need to buy are still there. We may also see buyers who've been on the sidelines in this past year's market re-enter the market. More choice of listings and less competition with other buyers might just do it.

Odds are prices will not spiral up for the next while. But they may creep down. If you sell now with the recent buoyant sales price history on your side, anticipating that you will buy later, you could end up buying in a lower market and be ahead of the game.

If you wait a few months, and a downward trend establishes itself, you may find yourself in competition with more homes on the market, as well as reluctant buyers holding out for more price drops. How this may affect your equity preservation depends on your subsequent move. Are you downsizing? Moving up? Moving out of area?

Contact me any time if you're considering a move. I'll be glad to discuss and advise on options, implications and strategies.

(Note: This article was originally published in my September e-newsletter. Drop me a line if you'd like to subscribe.)