February 13, 2012
A Time To Buy – And To Sell
Market Forecast: Real estate experts believe the market will continue to expand – albeit at a slower pace.
By TONY ASTLES
With the U.S. economy still struggling to recover (especially the housing market) and the European debt crisis seemingly getting worse by the day, it would be easy to assume that sooner or later, Canada is going to face a serious downturn. In fact, the Canadian economy – including the housing market – seems to have been weathering these world setbacks with remarkable grace. It’s certainly true that housing markets have softened slightly in some regions, but most financial authorities don’t foresee anything like the “bubble” so many Canadians feared.
Tracking the intricacies of the B.C. housing market is no simple task, and it’s often a matter of “who do you believe,” when it comes to forecasting. There’s certainly a hint of prices easing off in some areas of the province such as the Okanagan/Interior and Vancouver Island, but the coast is likely to remain strong – especially in “hot” areas like Vancouver West Side, Richmond, South Surrey and parts of the North Shore.
The condo market is very brisk with strong sales and lots of exciting new developments to choose from in most Lower Mainland locales. Some bankers believe that condo prices are unlikely to leap because of a strong supply situation. The Canadian Real Estate Association reported that home sales across Canada in December – traditionally a slow month – rose 4.6 per cent over the same period in 2010, so the overall picture isn’t too daunting.
Sales are likely to be boosted by the Bank of Canada’s recent announcement that it has no plan to raise the interest rate from its historic low and some analysts believe that rates are unlikely to be hiked much before 2014. One worry bankers have is that household debt levels are too high and this could affect the home-buying decisions of many.
Royal LePage predicts that house prices in Canada will climb by 2.8 per cent by the end of this year (2.3 per cent in Vancouver) and hinted that predictions of “doom and gloom” in the housing market are unfounded. Said Royal LePage Real Estate Services President Phil Soper: “Widespread calls for a major real estate correction in 2012 simply can’t be justified. The industry has significant momentum entering the year and buoyed by the stimulative effect of very low interest rates, we can expect the market to continue to expand – albeit at a slower pace.” Vancouver continues to experience some of Canada’s largest year-over-year price increases and according to Royal LePage, standard condo prices rose by 10.7 per cent and detached bungalows by 14.1 per cent.
Although many homebuyers and current owners may not realize it, the commercial market is something of a bellwether for the real estate picture in general. Bentall Kennedy is Canada’s largest real estate investment advisory and service organization and Executive Vice-President Tony Astles told Westcoast Homes that the downtown Vancouver commercial sector is “very strong, with very high occupancy and a healthy tenant base.” Astles explained that although it might be thought that businesses may be moving from the downtown area due to high rents, taxes, the cost of parking and other factors, this is not the case. “People usually have solid business reasons for maintaining offices downtown,” Astles said.
“We have substantial institutional ownership that doesn’t rely on high levels of debt… ‘Balanced’ is the word to describe our market.”
With widespread condo construction in the downtown area, increasing numbers of companies have their employee base very close by. Also, public transit has improved dramatically in recent years, making it easier for people to get to work downtown from outer municipalities. Commercial development is expected to be strong along transit routes around the region, but despite the new Canada Line, Astles noted that Richmond currently has higher commercial vacancy rates and as a result, there are attractive rents and occupancy costs in that municipality.
Concluded Astles: “Vancouver is the envy of the world from a commercial real estate perspective. We have substantial institutional ownership that doesn’t rely on high levels of debt, a well-heeled development community that generally acts pragmatically and we have a reasonably good economy. ‘Balanced’ is the word to describe our market.” Perhaps the same term can be applied to the residential market right now – no large gains, but no “bubbles” either. It’s still a good time to buy a home and if you have one to sell this year, the likelihood is that you’ll still come out on top and get the deal you wanted.
Despite an encouraging scenario overall, affordability remains a problem in the Vancouver market and at a recent Urban Development Institute Forecast lunch, group president Don Forsgren announced that his organization is inviting industry, government, community groups and the general public “to tackle B.C.’s affordability crisis.”