Home prices are a key indicator for the overall economy. When they rise people worry about shortages of affordable housing. When they fall they worry about trapped homeowners and bank failures.
As a Vancouver realtor, I can tell you that the local real estate market is not currently crashing. In fact, it may stay strong for years to come.
1. Inflation
If you have been watching the West Vancouver real estate market closely, you may have noticed a decline in prices over the last few months. That is because many sellers have decided to pull their listings due to a variety of factors, including rising interest rates and inflation.
The rise in inflation is causing some people to lose their purchasing power, making goods more expensive, and reducing the value of their savings. This can be particularly problematic for those who have less income, such as pensioners and those on low pay.
Inflation can be caused by a number of different factors, but it often comes down to a balance between supply and demand. When demand outpaces supply, inflation tends to follow.
A high rate of inflation can cause a number of problems, from lowering the purchasing power of consumers to increasing interest costs on the national debt. This is why it is important for governments and central banks to properly manage inflation and avoid overly rapid increases or declines in price levels.
One way to gauge inflation is through the Consumer Price Index, which measures the change in prices of a variety of goods and services. This is a widely used measure and is usually reported monthly.
While some inflation is healthy and typically around a 2 percent annual increase, too much inflation is harmful to the economy. Inflation can lead to higher wages and a better quality of life, but it can also have a negative impact on the overall economy by driving up the cost of essential goods.
Inflation can also be a sign of a weak economic outlook. If a country is experiencing higher inflation, this could mean the economy is growing too quickly or that government policies are not working as well as they should.
Another way to assess inflation is through a survey of households. The results of this survey are often used to set government policy and determine the growth path of an economy.
Some types of inflation can be beneficial for the economy, such as cost-push inflation. This type of inflation is usually a result of an increased price for input goods or services, such as oil.
2. Rising Interest Rates
Vancouver home prices have been soaring for years, but tightened lending, higher interest rates across Canada and the city’s new government and tax worries may be dampening the mood.
With interest rates rising, buyers are taking their time and negotiating in ways that ensure they’re making the best purchase possible in the long run — for example, through inspections and financing. But while the market has been shifting, affordability remains low for many homeowners in Vancouver and elsewhere.
This is especially true in the luxury market, which has remained resilient despite a series of government interventions. Royal LePage, a national real estate brokerage, said in a report that “home prices have remained remarkably resilient when you consider the economic headwinds that serial government intervention has created.”
While interest rate hikes are affecting all parts of the country, they’re particularly impactful on Vancouver and its sub-markets. For instance, sales of homes in the City of Burnaby declined 43.3 percent in November compared with the same month last year.
But while sales in other Metro Vancouver sub-markets also fell, the decline was comparatively smaller and not as severe. For instance, in Maple Ridge, home sales in December fell a meager 0.3 per cent from the previous month.
Meanwhile, in the City of Coquitlam, home prices were down just 2.3% from November and a mere 1.9% from October. That’s a strong indicator that housing prices are trending up in the area, says John King of Royal LePage.
It’s a good idea to follow both your local real estate market and the regional Metro Vancouver Report when it comes to tracking trends in the housing market. This is because sub-markets have fewer monthly transactions than the entire region and, therefore, they can outperform or underperform the larger market for a long period of time.
The Bank of Canada increased its overnight rate by 25 basis points on Wednesday, bringing it to 4.5 per cent. That’s the eighth increase it has made since March 2022, which is a slow deceleration in its rise and the smallest increase since the bank’s first hiking cycle in 2013. While the Bank of Canada’s interest rate increases are weighing on Canadian real estate markets, they’re unlikely to lead to a widespread crash, economists say.
3. Taxes
Affordability is one of the key reasons people decide to buy a home, but it’s also important to understand how property prices are affected by taxes. Taxes are the amount of money that a government takes from citizens or companies to fund its operations, programs, and other services.
The problem is that while some taxes are legal and fair, others are not. Some are imposed by governments without consideration for their economic impact on the people they’re meant to serve.
In the case of Vancouver, some of the key factors that have contributed to soaring real estate prices include low property taxes, a capital gains tax exemption on principal residences, and the provincial homeowner grant. While these policies have been beneficial for some homeowners and investors, they’ve been detrimental to the affordability of housing for many BC residents.
One policy that would be an excellent first step toward addressing the affordability crisis is raising the property tax rate in Vancouver. This would discourage speculation and land hoarding while also creating incentives for developers to build more homes on the city’s detached residential zones.
Another policy that could be implemented to help alleviate the affordability crisis is to eliminate some of the more restrictive land development restrictions. These include zoning laws that restrict the construction of single-family detached houses and duplexes on 80 percent of Vancouver’s residential properties.
This would allow developers to build smaller, more affordable multi-dwelling houses. This is one of the key policies that would have a positive impact on West Vancouver real estate.
While some homeowners and real estate agents say that the new tax policy will have a positive impact on their bottom line, others are concerned that it will have a negative impact on real estate prices. This is particularly the case for wealthy owners who have already built up a substantial investment in their property and are now facing higher taxes.
Moreover, many of the wealthy homeowners who will pay higher taxes will be foreign buyers. This is because a significant portion of the wealth in Vancouver comes from immigrants who arrive with a lot of money and continue to earn incomes outside of Canada. These immigrants are a prime contributor to the city’s housing affordability crisis.
4. Depreciation
Investing in real estate can be a great way to boost your retirement savings. But like most investments, it’s important to look for the best deals in the right areas. This can be particularly true for West Vancouver real estate, as many investors have found that investing in one-bedroom condos near the downtown core is a good way to increase their capital appreciation.
This can mean the difference between early retirement and late retirement, so it’s a wise idea to research the market and work with a qualified realtor who can help you make smart investment decisions. They can also run the numbers for you and compare different areas, allowing you to find the best investment for your needs and financial situation.
Depreciation is the loss of value that occurs to assets due to their age, wear and tear or obsolescence. This can affect any asset, such as office equipment, machinery, cars and even land.
Businesses regularly calculate depreciation to get certain tax and accounting benefits as their assets lose value over time. The amount of depreciation a business can claim is generally based on the useful life of the asset and the cost of replacing it, which is known as the salvage value.
There are a variety of ways to calculate depreciation, including straight-line and various forms of accelerated depreciation. These methods can give you a greater deduction in the first year of use and may reduce your tax bill.
The most common method for businesses to calculate depreciation is to use the straight-line method. This type of depreciation method is straightforward, consistent and easy to follow when it comes time for taxes.
However, it’s important to remember that the depreciation rate can change over time as the value of a business changes. So it’s always a good idea to consult with a CPA when determining your depreciation strategy.
Another thing to keep in mind is that some depreciation expenses can be recaptured. This means that if you have not taken the full amount of deductions you are entitled to, the IRS will automatically deduct the remaining balance from your taxable income.
Among many other things, David A. Grantham is a contributing author to UmassExtension West Vancouver Blo. He is a renowned expert on real estate in BC.
Born in North Vancouver, Louisiana, Dr. Grantham grew up in Lower Lonsdale. He then went on to complete his business degree at the University British Columbia. As of this writing, Grantham has completed over 100 projects, including the development of a high rise building in Vancouver.
He is a husband, father, son, brother, and friend. He was a dedicated outdoorsman and enjoyed sports such as hunting, fishing, scuba diving, and snow skiing. His wife, Alison Grantham, and their two daughters survived him. He is survived by his wife Alison Martin Grantham and two daughters.