New Home Guides' Ten Minutes With… Scott Brown from Fifth Avenue Real Estate Marketing
AFTER A RELATIVELY LONG PERIOD OF STABILITY In our real estate market, Lower Mainlanders were used to the fact that real estate was just going to keep skyrocketing up. But the last few months have been, exciting, to say the least. With the introduction of both the new foreign buyers’ tax as well as new mortgage regulations from the CMHC designed to cool hot markets, there’s been a distinct slowdown. With decades of experience in real estate in the Fraser Valley, New Home & Condo Guide asked Scott Brown about his thoughts on the current market and where he thinks we’re heading.
New Home & Condo Guide: How has the new foreign buyer’s tax affected the parts of the Fraser Valley that are not included in it? Have you seen an inﬂux of foreign buyers, and has there been a corresponding price drop in areas that are included?
Scott Brown: Interesting question. For starters, it is not readily apparent who a “foreign buyer” really is in these market areas. However, before I comment on the effects, I think it is important to comment on the tax itself. As much as the government refers to the new tax as “foreign buyer tax” I tend to side with industry experts such as Michael Ferreira, a Principal at leading real estate research ﬁrm Urban Analytics. At a recent Urban Development Institute presentation Michael commented, “Call it what it is. This is a Chinese buyer tax. And, despite it Chinese people are still buying”.
Now at our presentation centres in the non-exempt areas as well as exempt areas such as Abbotsford, Chilliwack, Hope and Mission, we recognize a growing trend of interest and activity from consumers who, regardless of residency, are members of what we respectfully call the Chinese community. For the most part the activity we observe in markets such as North Delta, Maple Ridge, South Surrey and Langley is end user/owner occupier driven. These Chinese buyers are attracted to schools, recreational opportunities and the affordability of multifamily housing options. At the same time, there is modest and growing interest from investors from the Chinese community and some of these buyers are foreigners. Prior to this year we observed that the investor group interest tended to be with respect to land and/or businesses instead of homes. Of late, this investment appetite is extending to new homes. That being said, this foreign interest is not a primary factor with respect to recent price increases with a possible exception of a few neighborhoods in White Rock/South Surrey.
NH&CG: Which has had a larger effect on consumer demand, the Foreign tax or the new mortgage regulations (stress test)?
SB: It really depends on neighbourhood. From our perspective, the daily media reports of “bubbles” and “corrections” and recent cautions put forth by CMHC, combined with the new tax and the new mortgage approval procedures have had a combined effect on consumer conﬁdence. While demand for new homes remains strong, the uncertain times of late certainly has created new angst for today’s consumers and has impacted the urgency with which consumers act. Simply put, they are taking more time to make decisions. There are two exceptions to the rule of late. The first is the Baby Boomer. This growing buyer segment has housing needs that are rapidly changing. So they are continuing to act quickly, absorbing new, large format condominium offerings at projects such as Delsom Estate’s Sunstone Village and Inﬁnity Properties’ The Belmont and Boulevard Group’s The Residences in Abbotsford. The second exceptional group is the ﬁrst-time condominium buyer and the condominium investor. The former realizes that the combination of townhome price increases and greater challenges with respect to ﬁnancing means adjusting their budget and expectations from a new townhome to a new condominium. The latter expects the new realities to eventually inﬂuence rents. These savvy investors also know that lack of supply and the increased costs for future new builds will likely create an opportunity for capital appreciation. Both scenarios on are occurring at newly released The Wex in Willoughby Town Centre.
NH&CG How do you think developers are going to react to this new market situation? Will they restrict supply, or keep on building?
SB: We believe the overwhelming majority of developers currently marketing their projects have the wherewithal to adjust to slower absorptions without aggressive price discounting. We do expect developers to carefully manage supply levels to maintain urgency, so expect restricted inventory levels and smaller releases of new homes. Finally, remember our population is growing every year. We still need more supply.