Vancouverites can be forgiven if 2020 seemed a little familiar.
The Vancouver real estate market closed the year looking very much like it did three to five years ago, as the latest statistics from the Real Estate Board of Greater Vancouver (REBGV) showed December home sales in the metro region shot up 53.4% year-over-year to 3,093, and grew marginally by 0.9% from 3,064 a month earlier.
“Robust December sales outpaced long-term averages in what’s traditionally the quietest month of the year in real estate,” Colette Gerber, REBGV’s chair, said in a Jan. 5 statement. “This was part of an unusual seasonal pattern the market followed last year, which can be attributed in large part to the pandemic.”
Gerber is referring to the unusually positive impact the coronavirus had last year on Canada’s housing market. Following unprecedented job loss and a stunted economy, the Bank of Canada plunged the benchmark rate to an historic low, sparking a flurry of activity for housing, especially previously cost-prohibitive detached homes.
Strong demand for detached housing never completely dissipated in Metro Vancouver, although the B-20 mortgage stress test slowed things down when it was introduced at the beginning of 2018. However, the rate cut this year corroded the 200 basis point stress test’s cooling effect.
Last month, detached home sales surged 71.3% year-over-year to 1,026 from 599 in December 2019, representing a 10.2% price increase to $1,554,600, which is a 1% rise from November 2020.
Detached housing sales skyrocketing in December is noteworthy for a couple of reasons, least of which is that winter months are typically quiet during the annual real estate sales cycle.
“I think it’s a natural reaction to ultra-low interest rates,” said Robert Mogensen of The Mortgage Advantage. “When HSBC came out with its sub-1% variable rate on insured mortgages a month ago, that really got anybody off the fence who might have been on it, because it’s the cheapest money of our lifetime. That lit a fire under some people.”
A confluence is at play, he added. The bank of mom, as parents who help their adult children get a foothold in the housing market have come to be known, was especially prominent throughout last year’s explosive sales cycle. In a region like Vancouver, the most expensive in Canada, even willing parents were priced out of the housing market, but historically low borrowing rates provided a panacea to help them help their children become homeowners.
“I would say that roughly 75% of my first-time buyers have assistance from mom and dad. It’s a very high number,” said Mogensen. “Mom and dad are of the opinion that, no matter what anybody says about real estate being a good investment long or short term, it’s an investment their children should be involved with. These low rates have also woken mom and dad up to the opportunity, and they may not have a mortgage anymore. When they see rates at sub-2%, they think about helping their kids out.”
In 2020, there were 30,944 total sales in the Vancouver region, a 22.1% rise from 25, 351 a year earlier, and 25.7% more than the 24,619 sales in 2018.
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