Home sales last month in Metro Vancouver have broken records yet again, according to Vancouver’s Real Estate Board.

All across the world bankers and investors are sitting up and taking notice of Vancouver. But is foreign investment the major driving force behind the record sales? Why are prices still going up beyond all expectations?

I’ll dive in and offer a few reasons why – and also why we’ll continue to see growth.

Vancouver Isn’t Going Anywhere

Despite fears portrayed in the media that Vancouver’s market bubble will burst, nobody seems to be actually convinced this will happen.

Even with recent government intervention, there are increasing signs the smart money home and abroad thinks Vancouver real estate remains a good investment.

Vancouverites and foreign buyers alike know real estate in the Lower Mainland is finite and it will always be one of the most desirable places to live – nothing will likely change that. The climate, the stable government, and the natural beauty all make Vancouver a safe investment.

Speculators (Foreign and Domestic) Still Investing

The foreign buyers’ tax, introduced by the previous Liberal government more than a year ago, has done little to slow down the real estate market. Home prices have continued to escalate and sales are on pace with pre-tax expectations.

However foreign investors aren’t the only ones jumping on the real estate bandwagon. Historically low-interest rates set by the Bank of Canada make Vancouver real estate a relatively risk-free for speculators to borrow large sums of money and invest in real estate. Better Dwelling calculated that from 2005 to 2013, a 41 percent increase in borrowing in Vancouver was matched by a 41 percent rise in home prices. This encourages Canadian investors – not just foreigners – to buy Vancouver real estate.

Stress Test

The Office of the Superintendent of Financial Institution, an independent agency of the Government of Canada has made it policy come January 1 mortgage applicants who don’t have an accepted offer must pass a “Stress Test” when applying for a mortgage. This stress test will be the higher of contract rate +2% or the benchmark qualifying rate.

What this means to the consumer is your total lending power will be decreased by approximately 20%. If you were qualified for a $500,000 mortgage you’ll be approved for a $400,000 mortgage as of Jan 1, 2018.

In the pre-sale condo market an especially hot market many buyers are getting in now with the down payment given by the parents or an expectation that interest rates will be close to the same in 2-3 years. However, there are so many things that can change from when you put down your deposit to the time when you complete.

Because buyers won’t likely be able to qualify for as much of a mortgage as before, there is a frenzy of activity before the new rules come into effect. People who have been thinking about buying for some time now realize they can’t sit on the sidelines any longer. They need to act now if they don’t want to miss out.

If you want to buy or sell a home give me a call. You can get in contact with me HERE