During the summer, the Richmond, British Columbia, housing market finally cooled down — much to everyone’s relief.
Here in the United States, the Richmond we know is the capital city of Virginia, but just a bridge away from Vancouver, British Columbia, sits the bedroom community of Richmond.
During the period from winter 2010 to the end of the following spring, Richmond, British Columbia, was not only the hottest market in the Canadian province, but probably across North America as well.
Here are two telling statistics: From November 2010 to May 2011 the average price of detached homes in Richmond skyrocketed by $200,000 (in Canadian dollars — which at the latest exchange rate is almost exactly even with the U.S. dollar); in April, near the height of the feeding frenzy, the average time on market for Richmond for-sale homes was just 18 days.
"In my 34 years of selling out here, I never saw a hotter market," said Jake Moldowan, former president of the Real Estate Board of Greater Vancouver (REBGV) and a principal with Re/Max Jake Moldowan Realty in Richmond.
"One statistic that stands out is sales to active listings. In a balanced market, the ratio is 13 percent to 19 percent sales to active listings (sales per month as compared to number of listings on the multiple listing service). In Richmond, from February to March it was running about 49 percent. During February and March, one out of every two homes listed was sold. It was humongous!"
Those folks who travel to Vancouver from the U.S. actually know Richmond although they might not realize it: It is home to Vancouver International Airport, located 20 minutes south of Vancouver’s downtown. The journey can be by car, bus or light rail, but in all cases one has to cross a bridge over an arm of the Fraser River because Richmond sits on Lulu Island, created thousands of years ago by the river’s alluvial sediments.
Richmond’s population has been growing steadily (up 1.7 percent from 2009 to 2010) and now stands at just below 200,000.
What makes Richmond different from just about every other city in North America and the reason for the superheated market is that its Asian population is more than 50 percent (some say as high as 70 percent) of the total populace, said Scott Russell, also a past president of the REBGV and general manager of Sutton Group — Seafair Realty Inc. in Richmond. "I believe we are the most multicultural city in Canada."
The Vancouver area has always been a hotbed of Asian migration, mostly because of Canada’s more lenient immigration policies and the city’s location on the country’s far western shore, which puts it closer to Asia than any other major Canadian city.
Recently, the majority of Asian interest in Vancouver has come from China, and that’s where the roots of the Richmond frenzy began, said Moldowan.
"Basically, what happened was, in mainland China, because of inflation, the government changed a number of policies for buying and selling real estate. To cool local speculation, Beijing introduced a number of measures such as increasing the property transfer tax 15 percent on homes sold in under two years and raising the minimum down payment on buyers of second homes to 60 percent."
Chinese real estate investors turned to the Vancouver area, in particular Richmond, which already had a large Asian population.
"We are closer to Asian markets so there has always been a lot of travel back and forth," said Bryan Yu, an economist with Central 1 Credit Union, BC Region, in Vancouver. "We also have an improving economy and the most temperate climate in Canada."
OK, so call Vancouver and vicinity the Sun Belt of Canada. Considering the intensely frigid winters of Canada, that says a lot.
The bubble of activity was in some ways a kind of panic-buying by Chinese investors that finally imploded by June.
"Chinese investors … realized that they were the ones fueling the market and just stopped, perhaps thinking they would come back in six months," said Moldowan.
"If you were coming to the Vancouver region and were looking to buy houses and all of a sudden prices were literally shooting up $30,000 in a week, or 20 percent over a three-month period — if that $700,000 home you were looking at was now selling for $900,000 — you would back off and wait."
While the average price for detached homes in Richmond has declined, in July you would still be paying an average price of more than $1.1 million — and we are not talking about a Beverly Hills, Calif., or Scarsdale, N.Y., but a community of tidy homes.
Or, they were tidy.
While it looks like Richmond offers a lot of room for expansion, there really isn’t. Lulu Island boasts some of the most fertile soil in North America and large farms spread out over the land — none of which can be redeveloped because the government strongly maintains agricultural land reserves.
"Any new development is now redevelopment, where they are knocking down homes in older subdivisions and rebuilding," said Russell. "Investors are looking for larger lots, 8,000 square feet or larger, and wide frontage."
Richmond’s city planner would prefer no more big developments, Russell said. Meanwhile, midrise condominiums in the downtown section of Richmond are under construction.
Autumn is generally a busy homebuying season for the Vancouver area, so I asked Russell if he thought there would be a buying-panic redux later in the year.
"I don’t expect a return to the frenzy," he said. "No matter what, affordability is always an issue. Somewhere along the line there is a price that people won’t pay anymore, and they will start looking at other areas like nearby Burnaby (population 227,389, up 1.9 percent from 2009 to 2010) or Surrey (population 462,345, up 3.4 percent from 2009 to 2010)."
Well, even if the Asian investors don’t return en masse, they have left a lasting effect.
"If you want the best Chinese food in North America, come to Richmond. We have hundreds of Chinese restaurants," said Moldowan.