Following the introduction of a new national stress test and BC housing policies this year, home sales and price growth are plunging in Vancouver’s luxury market.
In fact, the city ranked as the worst performing North American top-tier market in the first quarter of 2018, according to Knight Frank’s quarterly Prime Global Cities Index report, published this week.
The British real estate consultancy firm ranked 43 international cities by their prime residential prices, which corresponds to the top five percent of the housing market in each city.
In Q1 2018, Vancouver slipped to 31st place from 22nd place in the previous quarter, as annual price growth fell from 3.5 per cent to 0.2 per cent. Seoul took the top spot for prime real estate, as prices rose roughly 25 per cent year-over-year during the same period.
Knight Frank attributes Vancouver’s eroding luxury prices to a combination of federal and provincial factors.
“Vancouver’s slower rate of growth is likely to be an outcome of both BC’s macro prudential measures (including the change to foreign buyer tax and speculation tax) as well as the fact Canada (along with other major economies) are moving to a higher interest rate environment with three rate rises in the last year, resulting in a higher cost of finance for both owner occupiers and investors,” writes Kate Everett-Allen, lead of international residential research at Knight Frank, in an email statement to BuzzBuzzNews.
“However, we expect any further moves towards tighter monetary policy to be gradual, allowing the market time to adjust,” she adds.
Over a six month period, Vancouver recorded the second worst performance out of all global cities, as luxury home prices dropped 7.6 per cent in March 2018 from September 2017. The worst performing city was Stockholm, which saw a nine per cent decline over the same period.
Canadian real estate company Royal LePage also believes that the stress test and the BC housing plan dampened activity in Greater Vancouver’s luxury market last quarter.
According to its 2018 Spring Luxury Report, published on Thursday, sales of detached luxury homes in Greater Vancouver fell 38.2 per cent in Q1 2018, compared to the same period in 2017. Meantime, luxury condo sales dropped 26.5 per cent compared to Q1 2017.
Royal LePage defines all luxury homes as properties worth three times the average price in the local market.
Despite a drop in sales activity, Royal LePage says luxury prices rose during the first four months of the year, thanks to momentum in the market being carried over from 2017.
In Q1 2018, the median price of a luxury detached home in Greater Vancouver was $5,792,941, up 5.2 per cent from the same period a year ago, while the median price of a top-tier condo rose 7 per cent year-over-year to $2,503,873 during the same period.
Going forward, Royal LePage forecasts that activity in Greater Vancouver’s luxury market will ease heading into 2019.
“In light of recently announced provincial tax policies to both foreign and domestic buyers purchasing homes in the Vancouver region, price appreciation in the luxury market is expected to decline in 2018 while sales volumes are expected to continue to be lower than recent norms,” says Phil Soper, Royal LePage president and CEO, in a statement.
In the first quarter of 2019, the median price of a top-tier detached home in Greater Vancouver is expected to decrease three per cent to $5,619,153, compared to Q1 2018, while luxury condos are forecast to increase two per cent to $2,553,950 during the same period.