What “Strange Things Are Happening” in the Valley?
A recap of UDI Fraser Valley’s “Strange Things are Happening” forecast lunch.
It was a full house for UDI Fraser Valley’s forecast lunch on June 21, an event that has increased in popularity each year and is expected to continue to grow as the “centre of gravity shifts” east in the Lower Mainland and more development and investment is focused on the Fraser Valley.
Century Group’s Bob Ransford mediated the event with a panel including Don Campbell, Senior Real Estate Analyst at REIN Canada, Christine Butchart, Regional Economist for BC at CMHC, and Scott Brown, President & CEO of Fifth Avenue Real Estate Marketing. With the topic of “Strange Things are Happening” the event drove home some of the ongoing conversations that the development and real estate industries are having.
Scott Brown kicked off the event with his “strange thing”: the Fraser Valley market is behaving more and more like the markets to the west. Highlighting the acceptance of multi-family as the new “norm” and the resulting market share townhomes and condos are starting to have, as well as the price expectations of buyers who are moving east. He also highlighted how quickly new inventory is moving. Brown commented on some “strange things” that have also become the accepted norm in the Valley since 2010; large townhomes absorbing faster than single family and the rise of the condo, following the rise of the townhome.
Looking forward, Brown encouraged the audience to pay close attention to sustained price escalation, the emergence of more assignments, technology like WeChat, supply issues driving competition, the transfer of wealth from boomers to millennials and a lack of rental supply.
Christina Butchart of CMHC highlighted the major influencers regarding the “strange things” that are happening, including low interest rates, the low Canadian dollar, a strong labour market and the region’s population growth. Reflecting on 2016, Butchart highlighted the price acceleration in the Fraser Valley, the strength of secondary markets, the impact of the “foreign buyer’s tax” on the single-family market and the increase in rental construction that we experienced. She acknowledged that so far in 2017 construction has slowed but commented that some inventory that was started in 2016 is still under construction, which will continue to inject much needed inventory into the market.
Showing a variety of CMHC and MLS sales stats Butchart warned “don’t look at the averages”, citing that there are too many very different submarkets and product types being pulled into those numbers. She focused in on the difference between the lower and higher priced inventory as a “two speed market”. Lower priced inventory is in high demand and that is reflected in the absorption levels and resulting low inventory of townhomes.
REIN’s Don Campbell encouraged the audience to take a macro view of development, saying that lots of the statistics that are publicly available don’t give us a clear picture of what is coming, especially in such a fast-paced market. A macro view is especially important when it comes to the affordable housing conversation. Campbell asked the audience “what does affordable MEAN?”. Government bodies and developers are being pushed to build more affordable housing but the definition of what affordable means is murky and we need to take a macro view and examine interest rates, incomes and job growth to dictate what “affordable” housing means so we can build it.
Campbell’s comparison of the current environment of 2017 and 1972 drew on social and political trends of both eras, from the surge of equal rights protests to inflation and the popularity of beards, but his focus was the population distribution of Boomers in ’72 and Millennials today. The audience was encouraged to pay attention to what Millennials want in their homes and communities, especially since they will soon be entering their ‘peak spending’ years (46-47), while their parents are currently looking to invest and place their money in retirement, resulting in many Boomer parents helping their Millennial children with purchases. Campbell highlighted lifestyle trends that have emerged as millennials have become a dominant demographic, including flex-work setups, controlling your world from your phone, and the importance of transportation.
During the question period, it was highlighted that developers have been put in a tough spot as they are being presented in the media as both the problem and the solution. The development community is being tasked with helping to solve the shortage of housing while at the same time as being targeted as part of the problem. It was acknowledged that developers and real estate professionals will continue to be the scape goat for the challenges that the housing industry is facing in the Fraser Valley and beyond. The panel encouraged the audience to continue being advocates for the industry and to take their jobs of place-making seriously.