UDI Fraser Valley Panel Forecasts “Steadiness” Ahead

There was a record turnout at UDI Fraser Valley’s 2018 Forecast Luncheon as attendees came in search of insight on what the Fraser Valley real estate market has in store for us.

Moderated by Bob Ransford, Vice President of Development at Century Group, the afternoon’s expert panel voiced a consistent market sentiment with notes of a “plateau,” “steadiness,” and continued demand for more affordable homes while supply remains low.

Bryan Yu, Deputy Chief Economist at Central 1 Credit Union, shared a positive message of steadiness amidst recent shocks to the industry. Key take-aways from Yu included:

  • The BC economy is strong, so a real estate market crash is unlikely; however, there may be a mild correction followed by steadiness for a couple years, particularly on the pricing front.
  • The current lending environment is tighter than it has been in over 2 decades and the new mortgage rules cut buying power by 20-25%. The low mortgage rates of the past few years are a thing of the past and we should expect another rate increase this year and 4 more beginning later in 2019. Conversely, the drop in home sales has lenders competing for mortgage clients so increases will be minimal.
  • The current home sales environment isn’t being driven by a recession. It’s being driven by the policy environment and the constraints on credit.
  • 3% growth in prices is expected across Metro Vancouver over the next year, with single-family detached homes showing the weakest growth.
  • A sub-1% vacancy rate means the rental market will remain strong, with no significant changes in sight.

Eric Bond, Principal Market Analysis at CMHC, delivered a perspective underlined by the economic fundamentals, supply and demand. The top notes from CMHC were:

  • Surrey & Langley represent one-third of new household growth in Metro Vancouver.
  • Sales of detached homes have returned to the 10 year average
  • The boom in the sales-to-active listing ratios hit a wall in late 2017 and 2018 is now in an unbalanced situation. It’s still a strong seller’s market for homes under $750,000 but a buyer’s market for homes over $1,000,000. The impact of this is noticeable as most of the region’s current inventory is over $1,000,000.
  • The price growth curve will not continue, particularly for apartments, which has been incredibly steep recently. Prices will hit a ceiling as they bump up against the prices of townhouses.
  • There is no standing inventory in the Fraser Valley. There are 11,000 homes under construction in the Fraser Valley, a figure that is double that of 3 years ago. The incoming supply is not expected to greatly impact the market given how low supply currently is. This supply figure cannot be sustained in such a constrained labour market and when the time for approvals continues to increase.

Scott Brown, CEO of Fifth Ave Real Estate Marketing, also shared a positive view on the current market and path ahead as we adapt to a dynamic market. Highlights from Brown were:

  • We are in a “very good and active market” that will continue through 2018 and 2019.
  • Many consumers are done with the detached product type, opting for more affordable product types.
  • Affordability, even in the Fraser Valley, is eroding as supply continues to be an issue.
  • When planning a development project, be mindful of the unit mix as we will begin to see price compression while the blended average selling price per square foot appears to remain constant.
  • We are in a paused market, similar to that of 2016 when the foreign buyer’s tax had many sitting on the sidelines curious how the government intervention would play out.
  • 2019 will be steadier and “less expensive homes will continue to fly off the shelf.”

Thank you to UDI Fraser Valley for bringing everyone together for a great event. Check out the UDI website for upcoming events.

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Mike Harrison

Land & Investment Sales
Residential Development Land

Mike Harrison joined Frontline Real Estate Services as a broker with the development land division in 2015. He works with Justin Mitchell focusing exclusively on residential development land in the Fraser Valley and supports the entire development land division on marketing and analysis.

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