This September has many clients asking the question, what’s going to happen to the market this fall? There are many factors affecting our real estate market locally, federally and internationally:
- Lack of supply.
- Pre-sale opportunities
- Low interest rates and increasing inflation.
- Government intervention.
- The opening of international borders.
- Home ownership is still considered the best investment for most Canadians.
Overheated spring market eases but this market has legs.
Moderation in resale activity since spring sets stage for a slower fall. Think again! The increased market activity since the middle of 2020 has raised significant concerns that rapidly rising market values would further spiral out of control. The volume of sales over the summer has the market shifting to a more sustainable pace. We expect prices to level off in the more affordable sectors of the market. Solid levels of demand and low inventories keep the odds of price collapse low. Supply and demand conditions will most likely maintain current prices in the near term. Despite rock-bottom interest rates, homeownership costs continue to increase for end users.
There is a strong risk that interest rates could rise if inflation runs too hot. The historically low interest rates have fuelled the market during the pandemic. This tail wind could switch direction if inflation fears cause the rates to rise. Government intervention in the housing market will continue with an increased lending criteria, shutting out foreign purchasers, and the talk about removing the principal residence tax exemption. All these factors pose risks to our real estate market.
The Federal Election
With all federal parties proposing changes to housing policies, the next federal government is likely to introduce more measures. Here is a brief summary of what each party plans to do with housing if elected:
Liberals: Have pledged to invest $4 billion in new money to construct 100,000 “middle class homes” over the next four years. A close look at this proposal, however, shows most of the funding would go toward subsidizing rental housing. The Liberals further pledge to put up $600 million (double the funding announced in spring 2021 under its space conversion plan) to help transform vacant office space into rental housing. Urban B.C. though, has one of the lowest office vacancy rates in the country. The Liberals would also put $1 billion toward loans and grants for rent-to-own projects.
Conservatives: The Conservatives plan to build one million homes over the next three years and release 15 percent of government-owned real estate for new builds or conversion into rental properties. The Conservatives promise to mandate higher-density residential development near federally-funded public transit., such as SkyTrain extensions in Vancouver and the Fraser Valley. The Conservatives would also encourage private developers by extending the ability to defer capital gains tax when selling a rental property and reinvesting in rental housing.
NDP: The federal NDP proposes building 500,000 new “affordable” homes over the next 10 years with an emphasis on subsidized social housing. The NDP’s stated aim to “get big money out of housing” apparently refers to private, not public investing. B.C. consumer demand is for homes that can be purchased, according to the BCREA, and this is where the shortage is most severe. “Even with sales moderating slightly in the second half of this year, we are forecasting that home sales in 2021 will set a new record of 118,350 units before slowing to 100-150 units in 2022,” the BCREA forecast stated.
The reality is that housing is a hot button topic amongst voters and must be addressed by each political party that wants to get elected. The governments need to understand that in order to make housing more affordable they need to incentivize private sectors to develop homes for Canadians, whether this is affordable housing, rental stock or condos for sale. In Vancouver, long delays with development permits and rezoning at city hall, and community amenity contributions hamper housing starts. Unfortunately this election doesn’t cover this, so expect more of the same from the federal government.
Predictions for our fall and winter housing market:
1. A hot presale market
BC’s pre-construction market should continue to be busy this fall, with buyers looking to lock in low interest rates with a relatively small initial deposit. In city centers and the suburbs alike, interest in new builds has surged in recent months with 20-year low inventory in the resale market.
2. Demand should continue to outpace supply
Though much of the talk for the last few months has been about the cooling of Canada’s real estate market, a lack of supply has been one of the main drivers of the declining month-over-month sales numbers. A decline in new listings on the national level has left buyers with limited options to choose from, which could drive prices higher as more buyers enter the market.
3. Low interest rates will continue to fuel demand
You will not see many people calling for a market correction as long as interest rates remain where they are, and the Bank of Canada has indicated that a rate hike is not coming in 2022.
4. Competition from International Market
The border shutdown over the last 18 months means there are many buyers looking to get their families into Canada. We expect that many new buyers will enter our market when the borders fully open up to travel.
5. A market correction is unlikely in the short term.
Low interest rates, new buyers unable to come into the country, and increased need for living space have dominated BC’s real estate market throughout the pandemic. A Leger study conducted on behalf of RE/MAX Canada at the beginning of the year indicated that over 50 percent of Canadians viewed real estate as a top investment option, and this is not likely to change anytime soon.
If you’d like to discuss a game plan for your next purchase or sale, don’t hesitate to reach out to us. Our full service team of 6 and our combined 50+ years of experience allows our clients to be well looked after with industry leading results even in the busiest of markets.
We look forward to connecting with you soon. Your ongoing support and referrals are very much appreciated.
Kind regards,
Patrick Weeks Real Estate
Patrick Weeks PREC* – Partner & Lead Realtor
Devin Roch PREC* – Partner & Senior Realtor
Jenny Do – Realtor & Listing Manager
Matt Gibson – Realtor & Inside Sales
Noah Armstrong – Realtor & Pre-sale Specialist
Susan Jackes – Administrative & Client Care Manager
*Personal Real Estate Corporation
Patrick Weeks Real Estate – 2021 YTD Highlights:
- Top 5 out of 14,000 Greater Vancouver Realtors
- Over 100 Homes Sold
- Over $180,000,000 in Total Sales
- Top 5 agents in RE/MAX Canada