Home Buying, Real Estate News, Your Next Home
With summer full on, we are pleased to present this Summer edition of the Fifth Dimension, presenting a concise summary of the completed second quarter of 2022 for Metro Vancouver and the Fraser Valley.
Fifth Avenue is a full service, suburban market-focused residential real estate sales and development marketing organization. Combined with our associated entities Vancouver based BakerWest, Okanagan based Epic Real Estate Solutions, and Vancouver Island based Island Realm Real Estate, we are an integral part of British Columbia’s ever growing and changing new home market.
The summer blockbuster story pertains to the villains of inflation and rising interest rates. The quarter began with a slow shift in buyer mentality from fear of loss to fear of making a bad decision. However, constrained supply and sustained demand remain key factors as some communities have maintained or even increased sales while others have dropped off moderately or significantly.
The supporting data for this report is objectively collected and presented by renowned and renamed Zonda Urban (formerly Urban Analytics), a leading provider of advisory services on the new multifamily home market and a vital contributor to this report since 2010.
What a difference a year makes? 2021 was a very different year. Prior to that do you remember our last sustained hot market – 2017 and 2018? Yes, the one where foreign buyers were falsely accused of our paradoxical housing market with rapidly increasing prices and low supply? In fact, provincial leaders were elected on the promise of eradicating what proved to be a paper dragon. It is interesting to note that back then the numbers were skewed depending on which community was being analyzed. However, as a whole, foreign ownership accounted for less than 5 percent and was estimated to be closer to 3 percent of all sales, considering this was before we had any major pandemic related impacts on our market driving a different market of uncertainty. This all changed as the market adapted and we adapted to its new barriers. With the rising number of people continuing to be able to work from home and moving out of the major cities for affordability, it doesn’t look like this trend is ever going away. Employees are finding more balance while increasing efficiencies for the employers.
Having said all this, the frenzy housing market we experienced over the last 12 to 18 months has officially shifted over the last quarter. During this frenzy, foreign ownership accounted for a mere 1.0 percent of all BC home sales per the BC Ministry of Finance. In fact, foreign ownership in BC has not been over 1.5 percent since July 2020. So despite what our government was telling us, foreign buyers were not, and could not have been, a factor in BC’s hottest housing market in history that we just experienced. It is also safe to say they were not as large a factor as made out to be in any other hot market previously experienced either. We are, and always were, simply going through normal market cycles where prices are paid or justified based on supply and demand. Of course, you could make the case the length of these cycles is shortening. Seems everything in our world is moving faster every day.
Now in today’s market there are communities that are more sought after than others. For example, while most of Vancouver has gone to a yellow light for development, areas such as Richmond/South Delta maintain a green light with an 18 percent increase in sales where most of Vancouver saw a decrease. The Tri-Cities also saw an increase in sales of 14 percent, with Surrey leading the way with a 19 percent increase in sales. While sales slowed in other areas, some of this was due to limited or no product on the market, while areas with a yellow light such as Vancouver have seen sales decreases despite inventory increases.
Speaking of change, more regarding interest rates hikes are anticipated to happen this year. With prime now at 2.50 percent, this means fixed mortgage rates are between 5 percent and 6 percent for most buyers depending on their credit. To protect buyers and their ability to close on the pre-sale purchases they have already made, developers are urged to ensure they have a blanket appraisal with a lender that will hold the rates for buyers through until completion. This means a 24 to 36 month or longer rate hold for low- and high-rise condominiums and 12 to 24 months for townhomes depending on the construction schedule.
Helping people secure their home with confidence on their expenses will now be of the utmost importance. In addition, incentives are back. The market is now in a more competitive season even with supply constraints. So for a short window of time, consumers have a choice of where to buy and can take some time to make their decision. This means differentiation of development projects will be critical, and it is certainly time to ensure new developments are properly marketed, represented, and sold to target markets that want the product.
Consumers no longer feel the pressure to make a quick decision on their home purchase. There is time for them to process their decision. This also challenges the real estate community to reach back into their tool-kit to help buyers visualize the investment potential and opportunity. They are taking their time to ensure the decision they make is right for them and that the numbers will work for them. This means new product will need to match their needs and wants, have creative marketing and experienced sales teams, in order to deliver this to the consumer and meet the development goals. Product design, marketing and sales skills will once again matter, as we have entered a balanced market allowing consumers choices they have not had in the last 12 to 18 months. Soon the fall will be upon us and sales are there to be had and deals to offer for those who work the hardest and smartest.
Enjoy the Summer Sun while it lasts!
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