Richmond Condo News

A spectacular Richmond waterfront location – Riverport condos for sale

The Waterstone Pier condos at Riverport, Richmond are mere meters away from the Fraser River! The 3 buildings were designed to allow for optimum balance of space inside and  maximum exterior views of the large landscaped courtyard spaces.

Some of these Richmond condos have spectacular views of the the river and Mt. Baker view. A public waterfront walkway at Waterston Pier is integrated into Richmond’s public trail system. View condos listed for sale at Waterstone Pier – 14100 Riverport, 14200 and 14300 Riverport Way, Richmond.

Waterstone Pier at Riverport is a little resort oasis on the water, with a high level of quality and a nautical feel. Waterstone Pier residency is a unique water-front life-style, and once home, you don’t have to go out again for rest and relaxation. A river walk and the Riverport Sports and Entertainment Complex are just steps away from your new home.

Buyer Package for Waterstone Pier condos

A “Buyer Package” valued up to $750 is available to home buyers who purchase a condo at Waterstone Pier through James Wong or Jameswong’s Home Team. There are many unique features for this Richmond Riverfront condo development.

View condos listed for sale at Waterstone Pier – 14100 Riverport, 14200 and 14300 Riverport Way, Richmond.

Kindly contact me if you like to set up and appointment to view some of these beautiful homes listed for sale.

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Home prices in Vancouver earned the distinction of being amongst the highest in the world. I come across some interesting information comparing the Global & Canadian supply of money, crude oil and real estate prices.

Canadian real estate prices and money supply

Real estate prices in Vancouver  when compared to the supply of money in Canada and the world, showed a direct relationship in growth over the past 20 years. Similarly, the gain in crude oil prices appeared to follow the growth in the global supply of money.

The following table summarizes the prices for real estate, oil and the supply of money as recorded for January of 1990, 2000 and 2010 - for a period of 20 years.

First 10 years - 1990 to 2000

During the above period, home prices for single family homes and townhomes in Greater Vancouver made moderate gains of 27% and 16% respectvely. The increase in crude oil price and the supply of money were 2 to 3 times higher.

The gain in home prices from 1990 to 1994 was reversed after 1995 when some Chinese homw owners sold their homes and capitals back to Hongkong and Taiwan. The collapse in real estate prices was partly due to the exodus of capitals from Vancouver when the political situation in Hongkong stabalized.

Second 10 years period - 2000 to 2010

As you can see from the table above, the gain in Vancouver single family home prices followed the global supply of money closely. Although the Canadian money supply was increasing at half the rate of global money supply, some of the global money could have been recycled and ended in Canadian. 

This may be the case as during this period China was growing at a rapid pace, and home prices continued to gain in values. Real estate prices all over the world, especially the developed countries, all experienced double digit gains.

New money and old money

The rapid rise in home prices, easy money policy from CMHC and low interest rates all helped to fuel the real estate boom in Canada.  Liberal lending by Canadian banks through “home equity lines of credit” to home owners added fuel to the housing market.

Home owners who could tapped into their home equities through their LOC started to invest their money on 2nd, 3rd or even 4th homes. With rapidly increasing values, real estate proved to be a sure winner to the public.

Will real estate prices collapse?

This may not look likely if the gain in real estate prices has a direct relationship with the supply of money globally.

As can be seen above, real estate prices have a positive co-relation with the supply of money. Similarly, crude oil prices appeared to be affected to the same extend by the increase in global supply of money around the world. Money from China has a strong influence on Canadian real estate prices, and for many years the flow of money from China has not slowed down. This is not expected to slow down in the near future.

Home owners had enjoyed the price ride in the past. The factors affecting home prices are complex. If money supply is an important component in the whole scheme of thing, we may not see real estate prices coming down anytime soon.

South Granville homes in Vancouver West are sought after by wealthy home buyers. South Granville is a prime Vancouver west side neighborhood and has easy access to other municipalities in metro Vancouver.  Granville Street, Oak Street and Cambie Street provide easy commute to  Richmond and downtown Vancouver. 

The boundary for South Granville as generally used by the Real Estate Board of Greater Vancouver is south of 33rd Avenue, east of Oak Street, West of West Blvd and north of 57th Avenue.

Homes located in the adjacent areas like Shaughnessy,  Kerrisdale, Oakridge, South Cambie and  Marpole appeal to different home buyers. You can view homes for sale in other Vancouver Westside neighborhoods here.

South Granville neighborhood

South Granville neighborhood is charatherized with matured trees, and some of the most beautiful custome-built homes in Vancouver. Generally, the lot size for South Granville homes may range from the smaller 7,000 to over 18,000 sq ft.  

Home prices in South Granville are one of the highest in Canada. Detached home prices here range from the low $1.00 to over $5.70 million. Click here to view homes listed for sale at South Granvile, Vancouver

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Below is a CTV.ca nes report:

A new report says Vancouver has the world’s least affordable housing, and blames land-use policies designed to limit urban sprawl.

The Demographia International report released Monday looked at 272 metropolitan markets in Canada, the U.S., the U.K., Australia, New Zealand and Ireland and calls on governments to allow more housing to be built on the fringes of urban areas to help keep costs down.

The report also classified Toronto and Montreal as being severely unaffordable, and seriously unaffordable, respectively.

But Vancouver was deemed the most unaffordable market in the world last year when median housing sale values were compared to median household incomes.

Read the full story here.

Vancouver West Homes

Some of the most expensive homes in Canada are located in Vancouver West. Only the rich and wealthy can afford multi-million dollar homes in Shaughnessy, Point Grey, South Granville and other surrounding neighborhoods. You can view homes by price range using the links below:

Can one time the real estate market, and make money by following the monthly supply/demand for homes?

Real estate follows the basic economic principle that home prices are affected by market supply and demand. As can be seen from pricing trend and data here, home prices are inversly related to the changes in the supply/demand or list/sale ratios.

Following the pricing indicator

It is generally accepted that a ratio of 6 is neutral, or the market is considered to be in balance. There is no pricing pressure for home prices to move up or down. When supply exceeds demand, the supply/demand ratio rises above 6, resulting in home prices falling. The reverse happens when the ratio falls below 6, signifying stronger demand than supply, resulting in home prices going up.

Supply/demand ratio for Richmond

Home sales activities in Richmond contribute to the overall Greater Vancouver pricing trend as shown above. The list/sale ratio below showed a clear trend as whether home prices will move up or down.

You can see from the data that the supply/demand ratio tipped over in June and July of 2008. That's when home prices falled, and reached the bottom around Jan/2009 when the list/sale ratio was at it's highest at 17.33 months of inventory. The ratio falled quickly the subsequent months, and crossed the 6 month supply ratio by April, 2009. At this point, home prices turned and gained in values due to stronger demand.

The ratio tightened further to below 3 from June, 2009 and remained around the 2,5 months ratio until today. The 15% or so drop in home prices since May, 2008 to the bottom around February 2009, recovered just as quickly by November 2009.

Future market activities and pricing trend

The above is a simple housing price indicator to follow. There are many factors influecing the supply and demand for homes. There are many economists who are sounding the alarms that home prices in Greater Vacnouver are over-valued. If you are wondering whther it is time to buy or sell, you may want to follow the supply/demand ratio to guide you with your investment decision. You can be a month or 2 ahead of the crowd by taking action before the ratio turns above or below 6.

Click the link to view Vancouver and Richmond homes currently listed for sale. 

Outlook for Greater Vancouver's real estate market for 2010 and beyond

Below is a quote by James Schouw, James Schouw & Associates, Published on January 02, 2010 in The Vancouver Sun:

"Greater Vancouver's real estate market will continue to be driven by the growing number of people that simply need homes. Speculation, the catalyst of a 'bubble', is largely absent from the market due to lingering fear from the lessons of 2008. A bubble will only materialize if overconfident developers and speculators manage to oversupply demand".

Read the full article here>.

A review on current home prices and the market fundamentals are telling us that home prices at current levels are economically unsustainable.

Housing market dynamics

The supply and demand for resale and new homes are driven by market confidence. Home prices rebound due to ultra-low interest rates, and limited supply of homes. A case in point for Richmond, B.C, showed that in November 2008, there were 2,495 homes listed as compared to just 1,275 homes listed for sale in November 2009. The supply of homes was down by half!

The market dynamics may change again when market confidence is affected by external events beyond the control of the market players. A repeat of the housing correction that happened in late 2007 may happen again when there is a loss in market confidence. When signs of a market turning south are apparent, more sellers will want to sell, accelerating the price decline.

Cheaper to rent than to own

Buyers can opt to rent than to buy when they find home ownership is not affordable. A jump in mortgage interest rates will swing buyers decision, and will result in many of them staying on the sideline. Home prices are too high at current levels, as renting make more sense to many prospective home buyers.

You can view Vancouver and Richmond homes currently listed for sale.

Market confidence is the key

Market confidence is the driving force behind the high housing prices in Richmond and Greater Vancouver. The credit crunch of 2008 scared home buyers away from buying, resulting in home prices declining 15%. Rapid and successive cuts interest rates by the central Bank of Canada Canadian from early 2008 drove base-lending rate down from 4.25% to 0.25% by April 2009. Current rate stays at 0.25%. Low interest rates helped to boost demand for homes, and within a year home prices almost regained all the losses.

Facing the inevitable - higher interest rates

How long the current low interest rates environment can be maintained is anyone's guess? By 2006, home prices in Richmond already reached an over-heated level. Buyers who purchased their homes the past 3 years will not have a large cushion to buffer them from a large drop in home prices.

Outlook for the next few years

The current over-priced market will correct sooner or later. When market sentiment turns negative, demand from home buyers will collapse.  When home prices are losing values, more sellers will want to sell their homes, increaasing the supply causing a rapid decline in home prices. As shown in my earlier post, there is a large price gap between current home prices, and the break-even price point for real estate as an investment.

Real estate as an investment

At current price level, the risk of capital loss due to declining home prices is extremely high. The return on investment for a rental property in Richmond and other Greater Vancouver cities is negative. Home prices will have to decline significantly before a reasonable return on investment can be expected.

Click the link to view Vancouver and Richmond homes currently listed for sale.

Why Richmond and Greater Vancouver home prices are so high?

The main driver for Richmond and Vancouver home prices reaching current level is ease of financing, The average family income in Greater Vancouver assuming to be around $65,000 can only afford a $325,000 mortgage (using 5% interest rate and 35-year amortization). It will appear that the average home owners can only afford to buy townhouses or condos as detached homes are out of reach.

Longer amortization and low interest rates

The availability of 35-year amortization and ultra-low interest rates allow an average home buyer to buy a home 40% higher in value, as compared to the market conditions some 10 years ago. Easy credit, financial innovation and low interest rates have now resulted in home prices reaching an un-sustainable level. See chart below.

While longer amortization and low interest rates may account for some 40% higher in home value, the average Greater Vancouver home price around $910,000 is around 69% higher than the base trend-line price around $540,000.

Market confidence

The price difference between $910,000 and $756,000 may be attributed to buyer confidence. This may contribute to lift the average home price above the trend line. Those home owners who entered the market prior to 2004, are well cushioned and can weather a price decline of 30% or more.

What happens if interest rate rises, and market confidence collapses?

When the market sentiment turns and confidence disappears, home sellers will swarm the market. The important ratio to watch is the supply/demand ratio or "months of inventory". A reversal in the current ratio around 2.5 months to 6 months supply or more, will put pressure on selling prices resulting in a decline in home prices.

Duration of price decline   

Over the next few years, mortgage payment will go up due to higher interest rates, and rental rates may decline due to the increase in rental stock. Declining home prices and higher mortgage cost will result in more investors wanting to sell their rental properties. A more balance market will likely returned after a decline of 20% or more in home prices.

A home buyer should buy a home based on his or her own comfort level and ability to carry the mortgage commitment. Click the link to view Vancouver and Richmond homes currently listed for sale.

Below is an analysis on Richmond housing market and an attempt to establish the value of a home in relation to it's economic return as an investment.

What's the real value of a Richmond home?

The real value of a home is when the rental income can cover the cost of mortgage payment, property tax, maintenance, etc. When a market analysis (using 5% interest rate and 35-year amortization) is done comparing home values and their returns on investment, home prices in Richmond are found to be unrealistically high as shown below:

*computed at 5% p.a interest rate and 35-yr amortization, plus property tax, maintenance, etc.

Cheaper to rent than to own

The above analysis shows that it is cheaper to rent than to own except at the lower price range around $250,000 and when the interest rate is at 2.25%. As shown above, at historical interest rates around 5%, it is cheaper to rent than to own.

Generally, renters may quit renting and decide to own their homes when the cost of ownership is not more than 30% above their rental payments. As shown above, renters may opt to continue renting, until home prices decline significantly.

Break-even return on investment

Home prices in Richmond (and metro Vancouver) are much too high and cannot be justified as shown on the break-even analysis above. The lofty home values can be attributed to buyers who are willing to accept low or negative returns, while making gains on capital appreciation. Home prices at current level in Greater Vancouver is not sustainable. As can be seen from the illustration above, rental returns are not able to sustain current home prices.

You can view the metro Vancouver housing price chart here. The correction in 1994 took 4 years to bottom out in 1998 and another 5 years to recover to the 1994 level .

Market confidence & low interest rates

The critical factors affecting home prices today are buyer confidence, low interest rates and low supply of homes. The market dynamics can shift over-night with a change in market sentiment if interest rates rise significantly. Current low interest rate environment is not expected to last long. Eventually, higher interest rates will result in the housing market making a correction. A balance market will come about when the rental return from the investment is more in-line with other investments.

When renting is an option, home buyers may want to wait and see how the economy and interest rates play out in the near future.

Click the link to view Vancouver and Richmond homes currently listed for sale.

Can Greater Vancouver housing market go higher?

Market sustained by low interest rates

Longer amortization and low interest rates have a huge impact on home prices. With the introduction of mortgages with 35-year (from 25 years) amortization, home buyers are able to afford homes 16% higher in value. Coupled with interest rates drop from 5% range to around 3.55% for 3-year fixed rate now, home owners can afford homes 40% higher in values as compared to 10 years ago.

The above price chart for detached homes at $910,000 range shows a huge price gap between current average house value and home pricing trend line around $540,000. The above chart showed that average Greater Vancouver home price as of November/09 is 69% higher than the base-line price!

Danger of higher interest rates on home prices

If the mortgage rates are raised from current fixed 3-yr term around 3.55% to 5% or higher, home buyers will be constrained to buy homes at only around 80% of today's price. A loss of market confidence will trigger a collapse in home prices. Current rental return is generating negative cash-flow if an investor is buying a home for investment.

Rental returns as compared to home prices

From 2001 to end 2009, rental increase was in the range around 25% to 30%. On the other hand, home prices more than doubled and gained almost 135% in value.  A big jump in interest rates from current 3.0% level to higher rates of 5% to 6%, will have a major impact on many home owners.

When renting is an option, home buyers may want to wait and see how the economy and interest rates play out in the next year or two.

Homes currently listed for sale in Vancouver and Richmond can be viewed here.