Prices in Burnaby are continuing their downward path but are still far beyond what most families would consider affordable. At this point, price declines appear to be part of a long-term trend in Burnaby and across Metro Vancouver.
Some people blame higher interest rates and tighter mortgage rules for the weaker market, but these arguments don’t hold much weight. Mortgage rates are still at rock-bottom lows and the market weakness began in 2016 when foreign buyer taxes came into effect rather than in 2018 with the introduction of the stress test. Burnaby and Metro Vancouver house prices have primarily weakened because foreign direct investment has shifted to Toronto and Ottawa.
This article covers:
Where are Burnaby home prices headed?
What are Purchase and Listing Trends?
Should investors sell?
Is this a good time to buy?
The good news (for buyers) is that prices are dropping all across Metro Vancouver, but the not-so-good news is that prices are still beyond the reach of a median Metro Vancouver household with an income of $75,000 (before taxes). There is, however, a glimmer of hope for buyers as prices continue dropping through 2019.
Since the peak, house prices in most parts of Burnaby have dropped over $200,000.
From the beginning of 2015, Burnaby house prices climbed $600,000 to a peak in 2016 ($1.7M in South Burnaby). House prices subsequently dropped $120,000 the next year and then recovered. Now prices are dropping once again. Burnaby house prices are very volatile. Current value is already $200,000 lower than the peak, and it’s possible that prices might drop another $200,000 between now and the end of 2020. If you’re looking to buy or sell your home in the next three years, you should definitely pay close attention later in this article when we explore recent trends in buyer and seller behaviour.
West Vancouver, Downtown, and the Vancouver Westside are the hardest hit but Burnaby and East Vancouver have experienced significant price declines too.
Burnaby condo prices skyrocketed to a peak in the Summer of 2018. The good news for first-time home buyers is that since then prices dropped significantly. The benchmark Burnaby condo is almost affordable without help from the bank of mom and dad.
Burnaby townhouse prices are headed in the same direction as condos. The good news for townhouse owners is that house prices have dropped a lot more than townhouse prices, so the gap between the two has narrowed. For townhouse owners seeking to upgrade to a full house, this could be a great opportunity.
Although Burnaby home prices have dropped significantly they are still not very affordable. To put this into perspective, a first-time home buyer household earning $75,000 (the median Metro Vancouver household before tax income) can only get a $320,000 mortgage. This makes it painfully obvious that to buy an entry level $600,000 condo, a first-time home buyer needs to save a $280,000 cash down payment or receive a very generous gift from mom and dad. For most people, that’s just not possible.
In 2018, the most optimistic forecast called for 6% price growth while the most conservative expects no price appreciation at all. No one predicted prices would drop but in Burnaby they dropped by 7-11%.
Looking forward to 2019, we see most forecasters expect prices to drop.
The brunt of 2019 price drops will likely be felt by higher priced properties (i.e., more expensive neighbourhoods and detached single family homes).
Given the forecasts, the current market weakness, and the increased downward price pressure, prices will likely remain flat or drop for the next few months. Additionally, homebuyers and homeowners shouldn’t expect much price appreciation between now and the end of 2020.
2016 was the big year for home sales and the subsequent two years attracted fewer paying homebuyers. Metro Vancouver kicked-off 2019 with even slower home sales than the prior two years.
What does this mean exactly? Well, the market for all homes (detached, townhome, condo) are all trending toward a position where buyers have more power than sellers. This means buyers can leverage the weaker market to negotiate discounts and incentives. The positive outcomes for buyers are lower prices, more selection, fewer bidding wars, and ultimately a little less stress.
Not all markets have officially made it to full-blown buyer’s territory though. While the condos and townhouses are trending towards a buyer’s advantage, they are currently in a balanced market. Take note that as supply has increased, Burnaby home prices have dropped. This means that the current Burnaby prices may be unsustainable in a healthy balanced market. So, if new construction completions later this year push the condo market into a full-blown buyer’s advantage we could see major prices discounts in late 2019-2020. That means home buyers should drive a hard bargain and paying more than the list price should be almost unheard of. Yay for first-time home buyers!
2019 has been a slow year for home purchases, which is certainly not something we’re used to seeing. Richmond, the Vancouver Westside, and West Vancouver have seen the most dramatic falls in purchase and sales. Our research suggests that foreign buyers are moving on to other cities and countries. Scanning news outlets across Canada and reviewing realtor marketing materials, it becomes clear that any foreign money still coming to Canada seems to be directed toward Toronto, Ottawa and Montreal.
The number of Burnaby houses sold is trending slightly below past years while the number houses listed for sale across Metro Vancouver has been trending a little higher than past years. These trends of lower demand and higher supply explain a reduction in price.
In contrast, the number of Burnaby condos and townhouses purchased are significantly than 2017 and about on par with 2018 sale numbers. Metro Vancouver has experienced dramatically higher active listings of these types of homes. Basic economic theory tells us that we can expect this to lead to potentially dramatic condo and townhouse price reductions.
Condo purchases are low too. If condos aren’t affordable to first-time buyers, what does that mean for million dollar houses?
Pre-sales, which are purchases of brand-new homes from developers, have trended down substantially. Since developers need to sell at least 70% of a project to secure financing and begin construction, they are trying to entice buyers with price discounts, move-in allowances, and cool amenities. Some developers have offered up to a $100,000 bonus to the buyer realtor who can convince their client to buy!
According to MLA advisory, the current pre-sale activity levels “reflect a more normalized pace of sales for the Lower Mainland.”
At Mortgage Sandbox, we break down our market analysis to five key factors: affordability, capital flows, government policy, supply and popular sentiment. Read the full report to understand how these factors are affecting prices in Metro Vancouver.
From a seller’s perspective, now is a better time to sell than in two years as CMHC, a Government of Canada Agency predicts that house prices will be flat or drop for the next two years.
To benefit from the best-case scenario, a home buyer should talk to their mortgage broker about prioritizing flexible loan conditions and mitigating risk. Find out more about the benefits of a mortgage broker.
There’s potential for an overwhelming surge in supply and this would bring more downward pressure on prices.
41,000 homes were under construction in Metro Vancouver (8,200 in Burnaby) in February 2019. These are due to complete in 2019 and 2020. If a significant number of those homes were pre-purchased with the intention to flip them, they could bring a ton of supply to the Burnaby market.
With buyer negotiating power and dropping prices, 2019 will be a good time to buy a Burnaby home. However, 2020 may be even better.
If you are thinking of buying just be sure to drive a hard bargain, and cover your bases with smart and educated decisions. Don’t bite off more than you can chew.
Buying a home is a big decision, so check out Mortgage Sandbox’s Canadian Home Buyer Guide so we can walk you through the end-to-end process and get you ready to buy your new home!
Here are some recent headlines you may be interested in:
Sales slump could signal tough times ahead for B.C. realtors (Vancouver Sun)
B.C. creates condo flipping registry to catch tax cheats (Toronto Star)
Canadian Housing Market This Bad Normally Means Recession (Huffington Post)
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