Canada’s residential real estate market has proved remarkably resilient in the face of rising interest rates, slumping sales and a slowing economy.
Across the country, the mortgage default rate was a mere 0.15 per cent as of the third quarter of 2023. It is 0.01 points higher than the record low, but still nearly half the 0.28 per cent delinquency rate in Q1 2020 during the first shock wave of the pandemic.
In Western Canada, the mortgage delinquency rate ranges from a low of 0.11 per cent in British Columbia to a high of 0.46 per cent in Saskatchewan, with Alberta at 0.26 per cent and Manitoba at 0.20 per cent, according to Equifax Canada data.
In Metro Vancouver, the delinquency rate is 0.09 per cent, just 0.01 points above the record low.
Even fewer Vancouver-area homes fall into foreclosure because most troubled mortgage holders have been able the sell the property quickly at prices often at or above what the mortgage is worth, explained Amar Shan of Saba Realty Ltd., Vancouver, a specialist in B.C. foreclosures.
“There have been a lot of bargain hunters circling,” he said. “Intuitively, they all expected a catastrophic number of foreclosures with the rising interest rates. But it hasn’t happened – yet,” Shan said.
But Shan has seen a recent change with prices in the final stage of delinquency when a mortgage moves from being 90 days in arrears to foreclosure.
As of the third quarter, there were a total of 83 residential foreclosures in Metro Vancouver, including 50 detached houses and 33 strata townhomes and condominiums. This is still far below the down market in 2009, when local foreclosures were in the 130- to 140-home range.
Prior to mid-October, Shan said, typical discounts this year from a property’s assessed value were from 5 per cent to 15 per cent, with some selling for even higher than the asking price from the foreclosure trustee.
However, discounts of 20 per cent to 34 per cent are now being seen, he noted.
Shan said it is not a coincidence that the biggest discounts began after mid-October, as higher interest rates began to bite into housing sales.
“Prior to that time, the market psychology was relatively strong. Investors would get a sale agreed at a low price, but then the sale would be challenged in court by other bidders and the price would be bid up considerably,” he told Western Investor. “Foreclosure trustees knew this, and it was part of the reason they would accept very low offers. However, after mid-October, investors were moving more cautiously, so accepted offers didn’t get challenged in court, and the sales were at much lower prices.”
Foreclosure examples
Recent sales examples from Saba Realty include a seven-bedroom, 9,260-square-foot mini-mansion at 20133 2nd Avenue, Langley. Assessed at $4.79 million and offered under a court-ordered sale at $3,250,000, it sold November 2 for $3,150,000, a 34 per cent discount from its assessed value.
In Mission, a six-bedroom house of 4,874 square feet sold August 8 for $1,218,088, which was slightly above the foreclosed list price but $247,000 – or 17 per cent – below its original purchase price.
Strata examples include a foreclosed one-bedroom condo in the Koret Lofts at 55 E Cordova Street in Vancouver’s Gastown. Assessed at $1.03 million and listed at $702,700, it sold October 19 for $699,900, 32 per cent below the BC Assessment value. In North Vancouver, a new four-bedroom, 2,044-square-foot townhouse at 752 East Third Street in Moodyville, assessed at $1.96 million, sold under foreclosure on October 23 for 25 per cent less, at $1,470,999.
Residential land deals
It is not only homeowners who are dealing with a foreclosure, or the threat of it.
In Vancouver, in the wake of the collapse of developer Coromandel Properties in February 2022, a nine-lot, 0.67-acre land assembly next to the Nanaimo SkyTrain station is offered under a court-ordered sale by Colliers at $20 million. The parcel was bought two years ago for $29 million. It has not sold, reflective of the fact that Metro Vancouver land sales have plunged 62.6 per cent so far this year, compared to 2022.
Slowing condo sales and rising construction costs have stalled several new residential projects in Vancouver as developers seek deadline extensions. These include projects that were approved two years ago, including a 49-storey tower with nearly 200 condos and 162 rentals by Wesgroup Properties at 1450 West Georgia Street, and a planned 289-unit condo tower at 1650 Alberni Street by Landa Global Properties.
Rumours are swirling in Vancouver real estate circles that some condo projects may soon follow Coromandel into receivership.
