Housing affordability in Vancouver has been occupying the headlines for well over a year. While many young families are priced out and therefore leaving Vancouver for smaller cities, our condominium and townhouse market is seeing an explosion in selling prices. With very few listings in the market, multiple offers are common, and competition is fierce, however, never in history have we seen the kind of "over list" prices that some buyers are paying, often with no conditions. If affordability is so out of reach, who is paying $50,000, $100,000 or even $150,000 over the asking price in a bidding war for a 1 bedroom condo? Is it even thinkable that $700,000 for a 1 bedroom condo in Vancouver is affordable? Some of the sale prices in today's condo market leave me speechless, and wondering where this all ends, and thinking that someone is going to get hurt badly.
Historically, condo buyers, faced with multiple offers would typically offer a marginal amount over the asking price, complete with protection clauses - ie. subject to financing, inspection, and review of all strata documents. Recently, no-subject offers are the norm, with buyers taking the enormous risk of not being able to actually get financing. Banks are often requiring approval of strata documents for final financing approval, but the catch-22 is that they won't even look at them until an offer is accepted. Consequently, the Buyer is not only putting themselves at risk of the Bank denying a mortgage, but they are also putting the Seller at risk of the deal collapsing, which could result in a legal suit against the buyer.
Buyers are also foregoing a building inspection, and taking the risk that a potentially costly repair that has not been highlighted in the minutes may be just around the corner. This is particularly of concern in self-managed buildings, where the Strata Council may not have necessary expertise, or the will to plan for capital expenditures.
What I am hearing from my associates in the Mortgage industry is horror at the risks buyers are taking, particularly first-timers who are the most vulnerable. I am also hearing from my colleagues in Toronto that their market has hit a sudden stall, and many buyers who made no-subject offers at peak prices are not able to sell their homes to make that purchase. I do not advocate for any buyer taking adverse risk with their largest financial investment. The risk may win you the property, but will it be worth it in the end?