Is the Vancouver Real Estate Market Really Tanking??
In this episode Andrew la Fleur interviews Adam and Matt Scalena, Realtors and hosts of the Vancouver Real Estate Podcast. They discussed the current state of the Vancouver real estate market, how the new foreign buyer tax has impacted things, and whether or not these ‘sky is falling’ headlines are accurate. Find out what’s really happening in the streets of Vancouver on today’s episode!
Speaker 1: Welcome to the True Condos Podcast with Andrew la Fleur, the place to get the truth on the Toronto condo market and condo investing in Toronto.
Andrew la Fleur: Okay, It’s my pleasure to welcome to the show Adam and Matt Scalena. Adam and Matt are brothers and they are realtors in Vancouver. They’re also the host of The Vancouver Real Estate Podcast. Adam and Matt, welcome to the show.
Adam Scalena: Thanks for having us.
Matt Scalena: Hey, thanks. Nice to be here, Andrew.
Andrew la Fleur: Yeah, great to chat with you guys and looking forward to hearing more about your experiences in Vancouver. So why don’t we just start. You can introduce yourselves a little bit to the listeners and tell us a little bit about who you are and how you got started in real estate.
Matt Scalena: Yeah, so Adam and I both work at Century 21 In Town Realty brokerage here in Yaletown, which is right in downtown Vancouver. Sit next to each other. We’ve been working in real estate for quite some time here. Adam actually is the younger of the two of us. He is younger than me and he started. He blazed the path and I saw what a great time he was having and decided to follow in his footsteps here. The way we started the podcast was we were, you know, we basically meet up at the end of the day and talk real estate. It just became on of those things. We both listen to podcasts and we both sat around talking about insider real estate all the time and we thought, you know, why don’t we start one.
Andrew la Fleur: Yeah, that’s great. So how long have you been in real estate and do you have a particular area that you focus in, in Vancouver?
Adam Scalena: Yeah, so we’ve been in real estate 7 years and we focus in the detached market in Vancouver Proper and then also attached market in Vancouver, as well. So we sell condos, townhomes and houses. But we don’t leave Vancouver, typically, so we operate from boundary to the water and as far south as Richmond.
Matt Scalena: Yeah don’t cross any bridges. Don’t cross any bridges.
Andrew la Fleur: Okay, good good. How’s your experience been with the podcast? Always good to hear from a fellow podcaster. The Vancouver Real Estate podcast. I’ve listened to many episodes. I think you guys are doing a great job but how has it been? How has the feedback been from your listeners and what is the vision for it moving forward?
Matt Scalena: Yeah, I mean it’s been really fantastic. We started just over a year ago and we should say, Andrew, you were kind of an inspiration. Once we started and we found out about your podcast and became big fans of yours, as well. Yeah, it’s been really great and the podcast is growing quite quickly, in terms of listenership. It’s amazing how we’ve met so many clients through the podcast; helped so many people and it’s … Yeah, the feedback is always so great. We have a lot of realtors listening, as well
Adam Scalena: Right.
Matt Scalena: So, it’s been awesome. And largely, in the last 3-4 months, we’ve launched a new website and we’re just going to continue keeping on what we’re doing, basically, I think we’re just having a lot of fun with it.
Andrew la Fleur: That’s great. Yeah. Thanks for the kind words, as well. Definitely keep going. I’ve been doing it a little bit longer than you guys, but I can say it is definitely worth it and a lot of people really appreciate the information that they get from this format, so keep it up. Let’s talk about the, obviously the big thing in Vancouver is the foreign buyer tax. So it’s been a few months since it’s come in. Maybe take us … Give us a bit of an overview, as not people living in Vancouver, but just reading the headlines over here in Toronto, pretty much. What was the Vancouver market like, sort of a few months leading up to the implementation of this tax and then now you’ve had a few months with the tax, in place. How has the market been since then? Because, I mean, from our perspective here in Toronto, again, we, you know, it sounds like a lot of doom and gloom. We see these headlines of he Vancouver market is just down X percent or you know it’s such a dramatic drop in the market, you’re hearing these sort of adjectives being thrown around
Matt Scalena: Right
Andrew la Fleur: Wanted to hear it from you, being realtors on the ground, what was it like leading … what was it like before and what is it like now? What has the impact been of this tax?
Matt Scalena: Yeah. I mean, it’s kind of funny. I remember in late August, so the tax was implemented on August 2nd and it was introduced last week of July and yeah, there’s been some [inaudible 00:04:53]. The latter half of 2016, a lot of doom and gloom in the media. You know, the Vancouver Sun had just red arrows pointing downwards, was one of the front pages. The stats don’t really, I mean, it really depends on what segment of the market we’re looking at. But for a lot of the market it’s still actually quite busy.
Just to give, anecdotally, I wrote on a one bedroom condo in Yaletown in downtown two nights ago there’s 20 offers on it. So, the market, it’s still very competitive at certain price points and with certain types of properties.
Looking back at 2016 and the first half of 2016, basically when oil prices took a nose dive at the start of 2015 and the currency followed, too, is when we saw sort of the market really ramping up so you know January-February 2015 it started getting very busy and didn’t slow down in the summer, didn’t slow down in Christmas of 2015 and then we kind of hit peak craziness in the Spring of 2016. And it was, you know, you just, we were talking when we weren’t live here about Toronto. It sounds like we were in last spring was Toronto right now, you know, where everything was multiple offers. Things … Comparable properties didn’t really make sense in that you look at the last 5 sales and somebody would pay, you know, significantly over what any of the comps suggested. So in order to secure a property, you really had to bet on that future appreciation and kind of tack forward.
With all that said, so this was the kind of real estate market; there was a lot of anger, sort of, with locals that were feeling like they were priced out. And reasonably so, I guess. What we started seeing before they implemented the tax in June and July was it actually was starting to slow down. It was starting to cool. We had a detached home in East Vancouver in June and that was the first time Adam and I both worked I worked a Saturday open house Adam worked a Sunday and we noticed it wasn’t a 100 pairs of shoes at the front door and it was like, “What’s going on here?” So it was starting to cool and that’s sort of been, everyone kinda has that in mind now that that was kinda the case. But the, when the provincial government announced that tax and they announced it very quickly and everyone had kinda six days if you could, if you were not a permanent resident or a Canadian citizen, to complete on a property to complete that 15 percent. I mean, they gave a very short window. There was sort of pandemonium. It was right before the August long weekend. And August, It was like a punch in the face, really. The market it was like watching a market kind of teeter for a month or two.
But since then, we’ve seen kind of business as usual. I think it sounds like it’s very similar to Toronto in that it’s really a lack of supply. A lot of people that started hunting last year just couldn’t find a place. And they’re out, now, looking and it’s still quite competitive. What we’ve found is that the foreign buyers tax has really chopped off the top end so the West side mansion market is way down, I mean stuff just sits, right. But at the entry level, whether it’s on the West side, which would be up to 2.75 Million and below, you know, speaking generally. On the East side of Vancouver, kind of anything in there for detached homes under 1.25. Those properties are still moving. The condo market under a million-1.25 downtown is still very competitive. You know the sales ratios for January were, you know, it was 30 percent for downtown condos.
So it’s still quite competitive and it hasn’t been as doom and gloom as the national media has suggested and it also hasn’t been as doom and gloom as the local media. I mean, it’s funny you work this market everyday and you pick up the paper … There’s a disconnect for sure.
Andrew la Fleur: That’s interesting. So, are prices falling? Are you seeing prices falling in any segment?
Matt Scalena: So, yeah I would say the detached market is taking the biggest blow right now. So on the East side we’ve seen, for single family homes, a drop probably in the area of about 10-15 percent. And the same could be said for the West side. But for condos, generally speaking, we’ve seen a more balanced market. Downtown stuff is still on the climb, I would say, overall.
Andrew la Fleur: So how much of the change in the market do you attribute to the fact that the foreign buyers are, well actually I shouldn’t assume … Are foreign buyers not buying anymore from what you can see and what you hear? Or are some of them still buying even though they have to pay this 15 percent? I mean, I assume that pretty much no foreign transactions are taking place.
Matt Scalena: Well, you know what, it’s funny. Last July, I think, the numbers are never good here in Vancouver. They haven’t been great at collecting data. In July, I believe, it was 14 percent of transactions were foreign buyers, so not permanent residents or Canadian citizens. I think, now, it’s close to four percent. So it’s kind of leveled out, it sounds like it’s a little bit lower than potentially Toronto, right now. But, foreign buyers are still quite active. At least in our business, what we saw, was a lot of local Vancouverites have made a lot of money in real estate and it’s a city full of savvy real estate investors. With the foreign buyers tax, a lot of those people looking to buy an investment property, you know, they basically press pause. And we’ve had a lot of clients that have been taking a wait and see approach, since August. Interestingly enough, January we were kind of testing it, you know, what’s going to happen?
It does seem to be ramping up a bit and at least in, you know, anecdotally, my clients right now, a lot of them that were holding off to wait and see, at least in the condo market, are deciding they are going to make a move now. You know, I think that was the largest segment that went away in the last six months was those local investors.
Andrew la Fleur: Interesting. So, like how much of it, I guess I’m leading towards, like how much of the change in the market would you say is just psychological … Sort of a psychological response, as you say, people wait and see because they hear this news from the government and this big change in the market and people just … The market tends to just pause and the wait and see whenever there is a big government change that comes in. How much of it is that vs actually removing a huge pool of buyers from the market?
Matt Scalena: Well, yeah, I mean again I think that a large percentage of foreign buyers have disappeared and went elsewhere for the time being. But, you know, I think more than anything it is that psychology of the market. Like we, you know, we’ve talked about it before we operate like a stock market and when there’s bad news or uncertainty, people move to the sidelines. I think that’s what has happened over the last six months or so. A lot of people have just kinda moved to the sidelines. To quantify in any kind of meaningful way, it would be tough to say. The market, in the media specifically, you know the number of foreign buyers in our market, it’s always been, some have argued, overstated. And you know, not to say whether or not that’s true but we’ve never had the numbers to back up some of the outlandish estimates.
Andrew la Fleur: Well, whenever there is a change in the market and, as you say, some segments are declining; new opportunities are created. Like, if you are speaking to a real estate investor today, what opportunities are you highlighting to them to look at today, in today’s market in Vancouver?
Matt Scalena: So, right now, a lot of people if they are looking and depending on their price bend, but we are directing a lot of people to the detached market in East Vancouver. I mean, lots and homes that were selling in multiple offers just a year ago with you know 10, 20, 30 offers are now sitting. So there is definitely an opportunity to capitalize on that 10 to 15 percent decrease. And then, also, in the condo market, you know … Downtown seems to be very very active but the immediate surrounding areas are still active but there’s opportunities to be had so we might highlight an area like Chinatown, which is on kind of the East side of downtown or crosstown area as, you know, if somebody was looking for an investment property. Or even just the peripheral areas of downtown. So like, Olympic Village, Falls Creek- in and around there.
Adam Scalena: Mount Pleasant
Matt Scalena: Mount Pleasant. Where you can actually … These condos still come in the same kind of rent as a downtown one bedroom or two bedroom would get, anyways. So, you know, it’s a better cap rate. Better ROI’s as far as where we’re concerned.
Adam Scalena: And just to add to that, in terms of the direction the city is trending, there is a strong push East in terms of development. That’s where all of the cool coffee shops, the best restaurants and everything else. Everything is kind of pushing that way, so if you can get in a little cheaper over there and get good rent, it’s a no brainer.
Adam Scalena: We’ve heard it similar to the Toronto East end, although Matt and I are not familiar with Toronto but all the east sides of cities tend to be this size [crosstalk 00:15:32]
Andrew la Fleur: Yeah, Yeah that’s prevailing winds theory. I don’t know if you’ve heard of that one. But, yeah the East side of downtown Toronto, as well, is where most people would agree, myself included, that the bigger upside potential is moving forward. One of the trends we are really seeing in Toronto is because low rise housing and detached housing, in particular, has become out of reach for so many people, more and more buyers are turning to the condo market or turning to the apartment market. Are you seeing that similar in Vancouver? Have you seen that? Do families, in particular I am interested are families; people with kids or people planning on kids- Are they buying condos and living in condos as opposed to the traditional house, white picket fence you know that whole, you know, dream of the past
Matt Scalena: Right
Adam Scalena: [crosstalk 00:16:28]
Andrew la Fleur: That we’ve sort of been raised with … North Americans at least.
Matt Scalena: Well, yeah and I mean, it’s funny that you say that. We just had Adrian Crook, from Fivekidsonecondo.com, on our podcast a couple weeks back and he’s very much for the movement of, he’s raising five kids in a two bedroom in Yaletown, so he’s a great example of that. But, in talking about the decline that we have seen in the detached market; detached homes are still very much out of reach for the typical Vancouverite. You know, dual income with a family, absolutely. So, you know, people are moving to smaller spaces and a lot of people have kind of embraced a more minimalism or minimalist ideology and we’re definitely seeing that here, for sure.
Adam Scalena: And just to add to that, I mean a lot of people living in condos. Townhomes were an obvious, kind of, next step up, you know, if you had a young family. Those, for the most part of Vancouver, have become out of reach. You know, for a newer three bed condo, you’re looking at or sorry a new three bed town home, you’re looking at over a million dollars. And when you add strata fees or the maintenance fees on top of that, you know, it’s sometimes more expensive than a single family home. So, a lot of people living in condos and yeah, embracing it for the most part.
Andrew la Fleur: That’s great. That’s good- good to hear. Guys, it’s been great chatting. Is there anything else that I didn’t ask you about yourselves or about the Vancouver market that I should have asked you?
Adam Scalena: I think we’ve covered it all there. The long and short of it is I think there is definitely still some opportunities in Vancouver, especially right outside of downtown. And a lot of people we know, that are looking to either buy and hold houses on the East side or buy to build, have been watching the market. This is, kind of, an interesting thing, it’s sort of very real time. Right in the last ten days or so, but I’ve spoken to more one person who’s thinking that it might be the right time to jump in and we’re not going to see, you know, we’ve seen the considerable decline in the last six months, but we’re not going to … The inflection point has hit and it’s a good time to buy right now and we’ll have to see how that plays out. But, yeah, East Van homes are what we’re looking at.
Matt Scalena: And another … Just a side note is that the liberal government has talked now about they’ve confirmed that people with work permits will not have to pay the foreign buyer tax, which is, in our opinion, I think a big win because it’s going to allow people who want to come work in the city to do that without being penalized for home ownership; which is great. And also there might be some, you know, it’s going to be interesting to watch what happens come post-election time this year and what happens with the tax so we’ll keep a keen eye to that.
Andrew la Fleur: Great. Adam and Matt- thank you so much. If people want to get ahold of you or be in touch with you, what is the best way … best place for them to do that?
Adam Scalena: So you can check us out on iTunes or Stitcher and also
Matt Scalena: Google Play
Adam Scalena: Google Play. Or you can also just go to our website at www.vancouverrealestatepodcast.com. Or you can try me on my cell phone 778-866-4574.
Matt Scalena: I’m at 778-847-2854 or [email protected] and hey, we’d love to hear from some of your listeners.
Andrew la Fleur: Great. Thanks so much, guys and hopefully we’ll talk to you again, soon.
Matt Scalena: Okay, thanks.
Adam Scalena: Take care.
Speaker 1: Thanks for listening to the true condos podcast. Remember, your positive reviews make a big difference to the show. To learn more about condo investing, become a true condos subscriber by visiting truecondos.com.