The Vancouver Life Real Estate Podcast Episode 2 - Why Aren't Prices Falling During A Pandemic?
Why Aren't Prices Falling During A Pandemic?
4 months into a pandemic and Vancouver Real Estate prices have not fallen. In this episode of The Vancouver Life Real Estate Podcast local Realtors Dan Wurtele & Ryan Dash explore why prices are remaining stable and how the Vancouver market is bucking the trends once again.
Why Aren't Prices Falling During A Pandemic?
Dan Wurtele 0:02
Hi, and welcome to The Vancouver Life podcast.
Ryan Dash 0:06
This podcast is created to answer the most talked about questions when it comes to navigating the Vancouver real estate market.
Dan Wurtele 0:12
I'm your host, Dan Wurtele, a licensed agent and accredited Real Estate Investment Advisor based here in Vancouver, and I'm joined by my co host, Ryan Dash
Ryan Dash 0:22
Hi Dan. I'm also a local realtor and exhausted father of two, husband of one and really happy to be here.
Dan Wurtele 0:30
Let's get right into today's episode. Hello, and welcome back to the Vancouver life podcast. Today is June 29 2020. And today Ryan and I are discussing why have property values not declined during a pandemic?
Ryan Dash 0:48
Yeah, it's been what are we now four months into the pandemic. And why don't we start in the once the lockdown happened because that's when we really started to see a change in buyer behavior that will really just behavior in general for across the economy. I think the months leading up to it, say November 2019, through to the end of February 2020, we started to really see activity drive, prices were starting to decline. activity was, was very hot, there was very little supply on the market. And then COVID hit and everything sort of fell off.
Dan Wurtele 1:29
Yeah, that's right. I think, you know, most people, having all of us going through this for the very first time, nobody knew what to expect. So everybody just kind of took their foot off the gas, step back and it really just resulted in a market freeze. So kind of doing our first full month of pandemic or locked down what was April, and in April, we saw sales volumes fall off a cliff, it was extremely low sales volumes, but prices remained. It was very interesting prices actually increased in April, if you can believe it. But again, just People that sort of had to buy or sell were while everyone else stood on the sidelines and then by the time may hit I think a lot of people start to feel a little bit better about things you know, Canada and especially BC are doing such a good job with the Coronavirus that. I think a lot of people said okay, well life is gonna go on. So you know, it's okay to look at homes again. Even though things like open houses weren't available. There are ways and were ways for people to access properties. So the end of May a bit of an uptick in sales volumes and prices remain completely flat. And here we are now in June Okay, now we are in actually phase three bc GVRD doing a fantastic job. And the numbers sales volumes. Again, sales are up in June, we're actually we may be as high as or we might be a two year high in sales volume. We're already well about 2019 and we might be above 2018. If you can believe it.
Ryan Dash 2:53
That's crazy and when you when you consider the fact I mean, no joke here, people are likely have cabin fever, that having been in their place for so long. And you know, we're starting to see a couple of different buyer behaviors that maybe we hadn't really seen before. The lockdown, I think, affected the way people see their property and affected how they lived in it. I know for myself, you know, we were down on the seawall and we had my wife, myself and two little kids in 1100 and 50 square feet. And I have never wanted a house more than after having gone through that. And I'm sure there's plenty of parents out there that can relate to that. Not to mention those that had to start working from home together who never had to do that before. You know, now you've got a big issue where you've got two people living in a one bedroom and they're both at home working from home, and there's just not enough space now. So it started to create different demands and different pressures. And whether or not those are going to be Long term or just short term pressures, it's still unknown. But certainly when you talk about companies like Google, Amazon who are considering, you know, having a lot of their employees work from home now, or come into the office only a couple days a week as a result of COVID. Now we're seeing property being repurposed for for working from home, and that's changed demand and change what people are looking for.
Dan Wurtele 4:26
Absolutely, it has and I also think the condo crisis insurance crisis, these still these things still exist. So I think it's almost accentuated the desire for a lot of people to want to own land or get out of a strata as an example,
Ryan Dash 4:39
or outdoor space or something.
Dan Wurtele 4:40
That's it, you know, and the interesting thing too, is we're seeing big money coming back to the market. In fact, if you can believe it, Ryan over 20 homes, over $5 million were purchased in June.
Ryan Dash 4:52
Wow, thats significant.
Dan Wurtele 4:54
and this is interesting, too. So in 2020, there's been 11 homes over the 8 million dollar mark that have sold seven of those, the vast majority happened during quarantine. Very, very bizarre time. So, you know, here we are, and we're in phase three, the buying volume is up sales, the dollar figure is flat or even up. And, you know, when we're talking about momentum 40% more homes were sold in the last two weeks of June than the first two weeks.
Ryan Dash 5:23
I think that's probably reflective of our business as well. You know, certainly in the last I would say probably the last four weeks we've seen a huge uptick in business in terms of not just interest but actual deals getting done. Right,
Dan Wurtele 5:40
definitely Yeah, We hear it from you know, the brokerage to you. There's a lot of people the sentiment on the ground is that things are just heating up like crazy. And we are working with a lot of agents that are you know, absolutely just swamped with deals right now. And it's, it's interesting to hear it from the people that are doing it day in day out.
Ryan Dash 5:57
which is and conversely odd when you when you actually to speak to the public who may be, you know, haven't been speaking to a realtor or their realtor and you know, are asking questions like, Oh, well, you know what our prices have come down yet and you know, they always seem shocked when we tell them no, they've actually maintained in all honesty buyer activity is not just back up, it's, it's kind of through the roof right now. And it's surprising for a lot of people to hear that and I think, I think a lot of that has to do with where they're getting their information, right and and then also taking that information and blanketing it and using it as an average to talk about Vancouver when really that's not the case at all.
Dan Wurtele 6:37
Ryan, I know you and I, in the last month, I'd say on both sides on the listing side and the selling side we were in different multiple offers scenarios, probably eight to 10 times and, and these are across the board we're talking from 500,000 to three and a half million dollar price point is right there. There are bidding wars all the way up especially for the single family detached home right now.
Ryan Dash 6:59
We're seeing A lot of what's really interesting too is a lot of agents because they don't want to, well sellers don't necessarily want to bring a ton of people through their home. So we're actually seeing a lot of exclusive listings at the market first, they share it with their circles they try and get the most interested buyers in through first without opening it up to the public. And we're seeing some deals as soon as they hit the market, you know, day one kind of thing. They're being sold because a week before, you know people have been bringing them through through the home. So it's, again some changes to the way that people are shopping, using MLS not using MLS, using social media now far more than they ever have before. So very interesting shift.
Dan Wurtele 7:40
I think. The other thing that's really caught my attention lately is these these multiple offers these bidding wars that we've been in lately. They're all over ask. right because Sure, January, February, March at the beginning of the year, it was busy. And if you were in multiples the odd thing was you could be in a five way multiple, not one offer was over.
Ryan Dash 7:58
I was coming up to it, but not Close.
Dan Wurtele 8:00
Right nd now on the other side, you know, we're seeing huge numbers over ask and subject free has become the norm. I mean, we both written subject three, I think four times this month.
Ryan Dash 8:09
One was two days ago.
Dan Wurtele 8:11
Yeah. And and not a small price point
Ryan Dash 8:13
no, no well above 2 million.
Dan Wurtele 8:15
So and just as a quick reference, because a lot of people may think that Yeah, sure. You know, you're seeing sales registering in June, but they only they actually sold back in January. The reality is, is that these these homes, on average registered from a sale that happened two weeks ago. So here we are in June, and we're going to hit about 2450 sales. The average sales date for those was June 15. So these are really, you know, quite relative and up to date sales figures, not way back. Yeah, that's it. So, Ryan, what do you think what is causing these prices to to sustain or to increase or get these homes into bidding wars? What is it?
Ryan Dash 8:53
Well, I mean, it's a number of different things and I the difficulty here is trying to capture all of them. But certainly some of the major ones that we could talk about. There was pent up demand like we like we, we talked about prior to COVID. happening, we started to see a tremendous amount of Well, actually, before I even get there, if we go back, we went through 2018. Prior to that, we had what I don't know 15 month price correction, where we saw prices come down consistently by half a percent to a percent every month. And after, after a large, fairly decent correction, a lot of buyers that were standing on the sidelines started to jump in and started to pick up those properties, especially as we had you know, a bit more supply come onto the market, but that was eaten up very quickly. And then as a result, and as we've seen a lot of times of Vancouver, there's a fear of missing out. So once they hear about other buyers jumping in and multiple offers, it seemed to snowball and more and more people started to jump in.
Dan Wurtele 9:59
Let's remember as Well, 2019 was like a 20 year low for sales, were coming off a very low baseline. So the real estate market will ebb and flow. It does go through cycles. And last year was apparently a bit of a bottom of a down cycle. That's right. You know, we're in the upswing started, you know, like you mentioned earlier, it's somewhere around November of last year, and it continued up until COVID. And then it hit a wall and then now it's the activities and the intentions that were on the other side of that wall.
Ryan Dash 10:26
Yeah. And so I mean, you know, certainly you've still got that demand that was there that just went on pause right, those people are still back in play now. And they're trying to take on the current supply of inventory. But with that being said, Even now, you know, what are we June 29 inventory is low again, and you know the amount of quality property out there. If it is any good. It is selling very quickly and like Dan said, in multiple offers to write and Vancouver's always had a history of if the property is really nice and it's priced to market. It'll sell quick, right? That's just something that happens here. I think the other thing, maybe why we're seeing a bit better economic recovery is because our we have a large tech sector that's grown here in the last five years. And a lot of tech companies are global companies. So they make money all over the world. And the people that are doing all that software development, some you know, as COVID happened, I, you know, you only have to look at Microsoft Amazon stock Google stock to see what happened to those companies in the last three months. The value climbed tremendously. People started ordering, you know, more groceries to their homes, they started ordering more online to reduce contact, right. And as a result, you know, we've seen more and more of those employees start to buy more property.
Dan Wurtele 11:53
I think that leads to a very valid point and a headline that a lot of people see and I think are somewhat fearful of and you keep hearing that unemployment is at 15 or 16%. And yes, while that is true, what isn't necessarily mentioned all the time is the fact that the most jobs that were lost were at the lower income level. I read a very important headline or story the other day that mentioned that the high net worth or high net income jobs in Canada, and especially BC, only about 1.2% of those were lost in the first couple months of Covid. And so yeah, well, 15% employments a big number, it actually equates to around 5% loss in the actual income in the wages. And that's a very different story. You know, I kind of look at it as Imagine you're running the economy and the economy is your business. And in 2019, you, you had $100,000 in operating income to work with and in 2020 Well, now it's 95,000. Can you still make that work?
Ryan Dash 12:54
Dan Wurtele 12:54
maybe, you know, it's not the biggest number if you can pivot and transition. So it's just another way of looking at it. But, you know, 5% is a far more understandable and relatable kind of way of looking at those numbers.
Ryan Dash 13:06
I think another thing to take into account is that 5% is an interesting story. It's always, as 2008 taught us, you know, the bottom third of the economy are typically the ones to get affected the most. So, in Vancouver, you know, we've started to see a small slump in rental rates. And that is likely due in part to the people that are renting the properties, which is now going to affect investors to some degree. So, you know, there is there is a bit of that story where people are, you know, you often hear, oh, well, those people would never gonna buy property in the first place, fair, but they are the ones renting the property. So they're the ones floating it for people that are buying it. So there is going to be an effect there. Right? To what extent it's hard to say because, you know, we're starting to see the economy open up again and people are going out for drinks? I know I am. And, you know, I'm doing my part to tip keeping people employed, right? Because it all goes around. But certainly, you know, 2008 showed us that the top two thirds of the economy, typically, their jobs were more incubated their career style jobs, right, where they've been at it for five or 10 years, and have put themselves in an important position in the company. We've seen those kinds of jobs, a bit more protected than the ones that are more vulnerable at the bottom.
Dan Wurtele 14:35
So if you're in one of these jobs, and maybe even thinking about buying a home, well, guess what, it's cheap money right now, you know, and take that for what it's worth. But you look at HSBC, for example, they just released a 1.99% five year fixed mortgage, it's it's the lowest on record. Yeah. So if you are considering buying a home and you see you know, money at that, that percentage of interest rate it's pretty appealing.
Ryan Dash 14:59
Yeah. Why would you pay that off right away? Wouldn't it shirt so cheap? Right? I mean, it's almost free.
Dan Wurtele 15:05
You know, and I think that equates to the Bank of Canada. You know, they just mentioned that mortgage credit hit a record high in May, just last month. But it's accelerating too. And what that means is people are applying and getting approved for mortgages.
Ryan Dash 15:19
So that means that there's, there's literally, this is the max we've seen in terms of mortgages that have been taken out
Dan Wurtele 15:25
ever, ever, ever. Yeah, you know, and I think this also, we have a great colleague over at the Bank of Montreal, he's a top three in BC I think, top 10 in Canada, and he said he's never been busier than than last month, the amount of applications that are coming through are immense. What people are after
Ryan Dash 15:41
that reflects in our business, we've seen that
Dan Wurtele 15:43
and we know what comes after that right after people get approved, you know, a percentage of them are going to buy. So it's very interesting. We're seeing very polarizing activities. Now we're seeing headlines that are all doom and gloom, and then we're seeing activities that say very much the opposite,
Ryan Dash 15:56
right and as as like, like you would Anywhere, it really depends where you're taking your information from, right? Like if you read the CMHC headlines, you would think that Vancouver was going to suffer between a nine and 18% loss in terms of total value. But if you actually look at the historical stats and look at what CMHC has predicted, and then look to actually what Vancouver has done, it consistently outperforms those predictions, time and time again. That also CMHC changed their insurance guidelines. So they've made it more difficult for people on the lower end of mortgage applications to qualify for an insured mortgage, meaning they've got to have better credit scores, a better debt service ratio, and they can't use any more borrowed money for a down payment. But that being said, Genworth the private competition has said, well, we're not going to follow suit with that. Same with credit unions, and they're looking to take the balance of the business This, which is, which is very interesting. We're starting to see competition again in a tight timeframe. Right.
Dan Wurtele 17:06
CMHC one was interesting. So I think it was around late April that they made that prediction. And sure CMHC has a lot of power. And not only did they make this prediction, but they were literally sponsoring or paying for to boost Facebook ads that say this. Why would they do that? And, and then, of course, they're talking about Canadian Real Estate. What is that? Is Canadian Real Estate a farm in Manitoba? Or is it a studio in gas town? Yeah, I don't know. You know, you can't.
Ryan Dash 17:31
It's pretty broad.
Dan Wurtele 17:32
Exactly. So, but then they went and did or made this announcement that they were changing their rules. So they were almost trying to make a reality. Their prediction. Yeah, I mean, and
Ryan Dash 17:42
self fulfilling prophecy.
Dan Wurtele 17:43
self fulfilling prophecy. Thank you. That's a term I was definitely looking for. But here's the thing. It's like you said, Genworth said No, thanks. We don't have to do the same thing. So people still have an out and and yes, it's a big prediction. But let's also realize only about one in 10 mortgages in BC are
Ryan Dash 18:01
Dan Wurtele 18:01
insured with CMHC. So it's a small number that already affecting and now you can work your way around it. So it's it's interesting point, but I don't think it's going to have the effect that they predict at least not in GVRD
Ryan Dash 18:13
Dan Wurtele 18:13
At least not in the short term.
Ryan Dash 18:15
Yeah. So I mean, you know, that aside, let's maybe talk about one of the other big elements that could impact the pricing here. I mean, typically, Canada's immigration numbers are very strong. They have been historically, over the past few years. You know, we've heard numbers of anywhere between 250 to 400,000 people that come in here every year. So some numbers to share with you. Typically, we see somewhere in the range of 27,000 people a month that come into the country, new immigrants last month we saw 4140. So that's a significant Drop, right? That is going to over the long term it will affect It'll do. It'll have a couple things. I think, one, it might give a small window of time for the people that do live here who are not new immigrants, the opportunity to buy. And I think that's what we're seeing right now. We're seeing a lot of people making those moves that live here, because they can't. But as soon as those borders open up again, you know, and we start to see international employees start to flow into the economy, again, more visas more prs. Again, it's, this is just, this is a lagging indicator to potential price growth.
Dan Wurtele 19:39
It's good to note as well, that the average newcomer that comes to Canada rents for the first two to three years, right, so we may see a further impact in the rental housing market, right, because that's going to be the first to be affected. So that asset class is becoming a little bit harder to see the numbers that you may have Just last year, and of course, is this a short term problem with immigration? Is this a two month shutdown before our borders open? Or is it two years? Right?
Ryan Dash 20:08
It's impossible to really know,
Dan Wurtele 20:10
that's right. It's such a huge unknown, but a very, very important one. Because Yeah, if we're taking our immigration numbers down by 80%, of course, that's going to affect housing could be impossible not to.
Ryan Dash 20:21
That's right. Yeah, absolutely. So I mean, again, I know that, you know, the government would ideally like to keep those borders open. But when you've got, you know, the states showing what what was the yesterday 44,000 new cases of COVID-19? I can tell you that it's unlikely that that southern borders can open up anytime soon.
Dan Wurtele 20:40
Definitely. So another one that people are looking at here quite quite closely is the mortgage deferrals. Right, a lot of people I think it was, gosh, what was it 15% of existing Canadian mortgages, took advantage of the bank's offers to defer those mortgages between three to six months depending on their lender. Those three to six months. are starting to come up? Yep. So the question is, what percent of those actually need to defer compared to how many just did it for a what if scenario? Or just to kind of feel free of some capital in the short term?
Ryan Dash 21:12
Yeah. Did you keep your CERB payment to pay off your deferred, deferred mortgage? Or did you not?
Dan Wurtele 21:18
So, you know, there's a couple outcomes there, of course, is one Sure, we may see a percentage of people go into arrears. And it's like, people think all of a sudden, oh, well, once people are in arrears, they're just gonna be court ordered sales littering the market, and everything is gonna just drop Well, it's not really the way that works. So let's, let's play this out quickly here. Let's say at the end of July, people's average differed mortgage is now done. And now they have to pay that and let's say they can't, Well, okay, it's going to be at least three more months before they're actually in arrears, before the banks even start paying attention to them and saying, Hey, what's going on? Where's our money? And then let's say, you know, after those three months, they actually can't pay and the banks are like, Okay, well We're going to have to go and do a court ordered sale here. Well, that doesn't happen overnight, it takes six to 12 months for that thing to even go through the court process. So if you're thinking of jumping on a court ordered sale, you're about 12 to 15 months out before those are going to be really available. And those those aren't just being sold like a fire sale now, right. The banks want their money.
Ryan Dash 22:18
Dan Wurtele 22:18
They you know, they actually have to list these things, or around markets.
Ryan Dash 22:22
Dan Wurtele 22:22
you know, in order to show that they were trying to get the highest and best value for that property.
Ryan Dash 22:26
Dan Wurtele 22:26
So while court ordered sales after a deferral Cliff may happen you know, don't expect this to be quick and fire it's it's for a year out at least.
Ryan Dash 22:35
Yeah, exactly. In your buying premise should never be around picking up a cheap property because it's it's a court ordered sale. I mean, it is it is a strategy, but ultimately, you should be buying property for other reasons. So why don't we everyone is kind of been comparing our economy occurrences To the economy to the last major recession, which was in 2008. When that happened, that was an entirely different set of circumstances that caused 2008. Now, can a COVID outbreak impact the economy to the same extent? I don't know. It's it's possible. But certainly we're not seeing the Lehman Brothers things like those levels of collapse. Taking place right now. We've got massive liquidity in our economy right now. More so I think than there's ever been. So it's a very different time than 2008. Yes, is it a recession, it possibly could possibly be teetering on that, but for very different reasons and very different circumstance which will lead to a very different outcome.
Dan Wurtele 23:53
Yeah, I think if you want to look apples to apples here, in 2008, the home sales really start to get affected somewhere around January of that year of 2008, as things were starting to decline and increase in their rate of decline, but it took until July for the banks to start failing. And it took until mid September, I think was the 15th or the Lehman Brothers collapsed. And we saw, of course, you know, Canada is very tied to the US and how it performs. And so we were heavily affected, as was the rest of the planet at the time, if I remember correctly, yeah. And so, the difference then was is that home prices were affected right away. You know, like I said, the the the first bank started to fail in July. Well, we saw home prices decline in June here in Vancouver, right. They were they were tying fairly closely to what was happening in the States. And they dropped as much as 15% over nine months here. Yeah, the original 19%. But then what happened is the US you know, they started their bailouts. Yeah, big ones, too. Right. They started in October. I think they had three up Until December. Yeah. And interestingly enough, it was right around that time that the Vancouver market started to stabilize and begin its rebound as well.
Ryan Dash 25:09
How long did it take for that recovery?
Dan Wurtele 25:11
Well, in here's the thing, interesting thing here in Vancouver that 15% dropped over nine months, bottoming around March of 2009, but it only took 12 months to fully recover 12 months prices were going up one and a half percent per month on that recovery train. So it happened I think a lot quicker than people thought. But you look at the stock market in the States. That was a little different. Yeah, that was, that was a lot different. It's the stock market in the states crashed. The Dow did any way 50% lost half of its value. But it took four years for it to recover those losses.
Ryan Dash 25:48
That's right. Yeah.
Dan Wurtele 25:49
You know, and how is that different than today? Well, let's see here. You know, we saw the stock market had these violent up and down days in the states and they ultimately bottomed out at a 35 percent loss
Ryan Dash 26:00
And they have subsequently recovered in a much faster timeframe. That's right. You know, I think we're within 10% of the stock market highs as of June 29. of 2020. Yeah, no, that's not
Dan Wurtele 26:06
Ryan Dash 26:13
Yeah. That's not to say it's super volatile going back and forth on its way up there. But it's very interesting and difficult thing to evaluate. There are a lot of moving pieces in that stock market,
Dan Wurtele 26:28
for sure, for sure, but to see, you know, a few month rebound instead of four years. It's it's I mean, let's be honest here. I think we've all seen that headline that the US job or unemployment rate hit an all time high. And then on the same day, the stock market also had its biggest point gain, right, like the economy and the stock market are completely separated now. You know, it's they do not interact coherently with one another. Yeah, so I think one of the big things to mention here about relating 08 to 2020 is that in 08, the wealthy were affected.
Ryan Dash 27:05
Yeah, they really were.
Dan Wurtele 27:07
And in 2020, the wealthy became more wealthy for a major part, you know, I mean, it's it. That's, I think the big difference and I think we're still seeing a lot of liquid people moving money around
Ryan Dash 27:18
Well, in COVID has really exposedthe income disparity, right, it's really shown that if you, you live in a healthy place where you're, you know, you live in an educated society where healthcare is prevalent and available, how much better you stand to fare as a result of that than say, somewhere, you know, I just the numbers in the states are, are staggering, you know, 40 million unemployed or something crazy there.
Dan Wurtele 27:49
We, we got some colleagues that were very big agents in our weight, and they're still agents today and one of the big things that they mentioned is that in 08, 09 The phone stopped ringing. There was nothing going on. There was no one was interested in real estate then
Ryan Dash 28:05
Yeah, everyone was terrified.
Dan Wurtele 28:06
You know, it was a very different world, whereas now, everyday through COVID there's still activity. Yeah, you know, people are still buying and selling people are still asking questions. It's very, very different than sentiment, in 08.
Ryan Dash 28:18
I would like to think that we've learned probably from 08, you know, we watched a lot of what happened in 08, and I think with COVID, we acted, you know, economically anyways, a lot quicker than then what happened in 2008. But, you know, that being said, it's, it's still going to have an impact that we can't quite see yet.
Dan Wurtele 28:43
Agreed. Agreed. I think one thing that's very noticeable, and it's Canada wide, but even in Vancouver, here, of course, is the rental market and what is happening their rental rates across Canada, they're down just under 8% on average, and this is just over three months. That's a big drop, and then in Vancouver, it's estimated to be about five and a half percent rental rate drops so far. And that's numbers up until the end of May, you know, June may even be a little more dire. Of course, I think one of the main reasons is there was a large amount of Airbnb properties
Ryan Dash 29:14
that went to long term rentals
Dan Wurtele 29:15
that went to long term rentals. Exactly right. People saw their income dries up overnight and had to do something. Yeah, right. So suddenly you have thousands of, or 1000 inventory spike. And so of course, prices are going to become competitive
Ryan Dash 29:28
totally. And we're, you know, we've got a client. Actually, I think he's in Squamish of all places where Airbnb was one at one of its hottest. He was averaging for his little laneway home, somewhere in around 35 to $4,000 a month on a 450 square foot little Airbnb, like unbelievable numbers. As a result, now, he's now rented it long term for 2500 a month. So that kind of shows you that swing that some Investors are willing to take for some long term security during this time.
Dan Wurtele 30:04
So I think you know if we're going to talk property prices, let's reference the Yaletown condo market, for example, because I think that's a very strong one for the rental market. Yeah. But it's also taken a hit the last two months, and in May very likely as well in June, just because again, if you're an investor and you're seeing the lower income earners, have their jobs threatened more than they have in the history of mankind, basically, is that something that you want to invest in today?
Ryan Dash 30:30
Well, I was over at a client's home last night, we were chatting about their investment property, you know, and they're, they're looking to unload it because the client that they had or the renter that they had in their great renter was paying 2500 a month for their one bedroom. If you could believe that's pretty significant number, you know, and now he's, he's moving out because he was able to get something bigger in the better part of town for 2200 a month, you know, and so they're starting to Look at, maybe it's time to move this particular kind of property and get into something a little different, that maybe it's a vacation property in Osoyoos or something to that effect where we're seeing a lot of people being like, I can't go south or I can't go to Hawaii now I can't go on a vacation. So I'm going to go to, you know, I need a summer home or I'm going to split one with four people or something to that effect. So we're seeing a big shift in, in, in property type and the reasons for them.
Dan Wurtele 31:27
That's a great point. I think, you know, a lot of people that are investors, where are you gonna put your money right now? Yeah, you know, and there's a lot of markets that aren't very appealing steel stocks are a roller coaster gold is is interesting. Yeah. But let's say you still want to be within real estate. Well, maybe the downtown condo isn't right for you. But like Ryan touched on Okay, we're in a summer now where anyone who is going to travel is going to probably travel somewhere to like the interior or the island or Whistler and suddenly these short term vacation homes and those neighborhoods might be very lucrative
Ryan Dash 31:58
and honestly meet you may see a return of stronger Airbnb markets there to, you know where a lot of a lot of those marketplaces places like cultus lake where Airbnb they do allow depending on where exactly. You know, that is something that you as an investor need to think about how does how do I make money still work for me in in an environment that keeps changing? And it's about staying ahead of what those demands are right?
Dan Wurtele 32:28
Mm hmm.So Ryan as a licensed agent that transacts frequently in Vancouver, what's your take what's gonna happen next here?
Ryan Dash 32:38
Like I've been telling all of my clients, I can't see past the next three months, mostly because the last three months have been so gnarly in terms of stock markets going all the way down, all the way back up, you know, huge injections of money into the economy. You know, I We're also seeing a decent amount of fraud because of all of this too. So, you know, there's people taking advantage of of the taxable dollars that are going back into the economy. How do I think it's all gonna play out? It's difficult to know. Certainly, I would not be buying something to try and sell it in six months. If I was going to be buying something, I would be wanting to hold it for five years or more right now. I do think in the near term, we're going to be okay, so I think, you know, here in BC from, you know, July's sort of through to October, I think things are going to stay relatively calm. The province is going to continue to reopen, I don't think the borders will. I don't think you're going to see kids going back to school full time until likely the end of 2021. That's just a prediction I have, you know, or they will be going back but in some modified way. I just think that the short run is really the most predictable thing because the government is the one calling the shots right now. So until we get back to a really more of a free market, it's very hard to make a prediction right now. But I would say that, you know, in the short run, we're likely going to be okay. And in the long run, if you're thinking long term, you know, hold, hold long, right? Don't expect the 2021 sale. You know, if you're buying something now, that's a big risky move.
Dan Wurtele 34:24
Yep. All very good points. I think we always tell people to buy for the long term. You know, even even a seven year minimum is a good horizon. Yeah. You look at the history of Vancouver real estate prices, and they have weathered many storms up and down. And historically, it's you've never actually had to hold on to a property for longer than seven years for it to have recoup the full losses and come back to the same purchase price.
Ryan Dash 34:48
Yeah, we were I was actually looking at stats the other day, and when you look at the zero to one year change, right, it fluctuates and it moves quite a bit up and down. Whereas if you look at the zero to five year rate or the zero to 10 year, hold the 10 year hold on average Vancouver on average average properties across all property types, all markets in Vancouver. Do you know the average growth was down over 10 years?
Dan Wurtele 35:15
Ryan Dash 35:18
Dan Wurtele 35:19
Ryan Dash 35:19
Dan Wurtele 35:20
Ryan Dash 35:20
80% growth, right? Which is significant. That's significant. So if you like, like the stats, say if you're trying to make a play here, you're trying to time the market. I don't see why you would do that. It's your time in the market that shows you where your potential opportunity is. So stop trying to say Well, I've caught it at the bottom. When really, you might go down lower, you might go up way higher. It's going to be your long term hold that makes you money, and it's going to be your long term hold. That is your safest move, especially in today's market.
Dan Wurtele 35:55
Let's say there is a deferral cliff. Let's say unemployment increases. Let's say. Let's say mortgage rates increase. Let's say the market takes a 15% hit. Okay, so what do you have to sell? No, of course not. Right. And we can look to 08 as a potential reference as to what might happen, it might take 12 months for that to recoup. Who knows we're already seeing things popping back quicker than they did in 08. It's a very different, very different world we're living in right now. There's There's still tons of unknowns. But I guess the point is here, don't be afraid of a 15% loss. If that were to happen if again, your long term goal is to hold it for seven plus years and I'll give you my property for example, I bought in 2003. I still hold this property today. I went through the 08, 09 crisis and went through the 2012 Blip. I went through the 2020 pandemic and guess what I just never sold because I was scared from a headline. And my property value is up 250% just by not selling just by holding and living and enjoying the home. So Just because you're worried about buying or selling in a pandemic, well Don't be because there's going to be something else down the road so does reality
Ryan Dash 37:06
and I can actually speak to a little short shorter term turn in my life. We bought our condo actually hit the height of the market Well, almost the height of the market in 2016 right before the foreign buyers tax came in. And it was expensive or at least it felt like it and you know, I kind of wondered how was I ever gonna make money on something like this when the market was already so high? But in all honesty, if I went to sell today, you know, I would be looking at over $100,000 gain. And that has been through some pretty turbulent years. You know, where we saw all kinds of speculation empty homes tax foreign buyers tax, the government sticking their finger in the market left, right and center. You know, obviously a massive recession now pandemic and here we are up 100 grand I don't know really where else you can do that with your investments short of knowing something in the stock market that nobody else us.
Dan Wurtele 38:07
And let's keep in mind to, you know, speaking openly and honestly here, the real estate market in Canada is not necessarily a free market. Right? The banks and government can stimulate this up and down at any time. Yeah, right. If this if let's say we hit a 15% loss on average, and it was looking like it was going to get worse. Well, can the stress test disappear overnight?
Ryan Dash 38:26
Can the interest rate drop?
Dan Wurtele 38:27
Can they bring back 40 or amortizations? Yeah, right.
Ryan Dash 38:30
There's lots of opportunity
Dan Wurtele 38:31
can you buy investment properties with 5%. Down. There was a time when you could buy investment properties for zero percent down, and this was not that long ago. I know. I would pick up a few if that happened. Right. So
Ryan Dash 38:41
and that's just it. That's how you stimulate the economy. Right. And I think what you're saying is we're not there yet.
Dan Wurtele 38:48
Well, I'm saying it's, it's, it's a protected asset, right. Whether you want to call it an asset or your home, whatever it is to you. It is largely protected by the powers that be being our government being the banks. So it's it's, it's fairly safe in that sense, I would like to say, you know, while none of us can predict the future future, you know, if history repeats itself, it is a very protected place to to keep your money and just basically not pay your rent to somebody else. No, I agree. So when someone asks you today, Ryan, should I sell?
Are people buying right now?
Ryan Dash 39:22
The answer is yes. The answer is people are not only the buying, they're looking at buying property that maybe they hadn't thought they would need to buy before. And this is a result of COVID right. Like I was saying earlier in the podcast, you know, people that have decided to go from a one bedroom to a two bedroom. They also might be trying to make that switch to go to maybe a two bed den so that they can get an office space as well. Or they were going from A 2 bed like myself right now with two children and we were thinking a townhouse but maybe we'll go another 15 minutes east or south and get that house and I'll take on that drive, but that gives me some outdoor space I can now work from home I don't have these kind of constraints that I'm faced with in attach living. And furthermore, you know, when you when you look at attached living and if COVID does have another spike, the more people you live with, maybe the more exposure you have been getting and that's not something that people are taking lightly anymore.