February 10, 2017
Moving on up, and up
Urban Development Institute forecasts Vancouver real estate prices will continue to rise in 2017
Real Estate Watch
By Michael Bernard
So you thought housing prices would settle down a bit after last year’s foreign tax hit?
Think again, says a panel of leading developers. With continuing population increases—about 20,000 new households this year are forecast for Metro Vancouver—and seemingly insatiable demand, they predict real estate prices will rise by an average of 10 per cent.
In an increasingly uncertain world, exacerbated by war, terrorism, memory of the global financial crisis and Donald Trump’s surprise election in the United States, and fuelled by the baby boomers’ “great wall of capital,” people are seeking “safe harbour” in places like Metro Vancouver, says Eric Carlson, CEO of Anthem Properties, developers of the Station Square complex in Burnaby.
“The movement of money, the movement of people to safe harbours is huge and is stimulated by all this fear, prosperity and anger,” Carlson told a sold-out crowd of about 1,200 attending the Urban Development Institute’s annual forecast luncheon in January. “Metro Vancouver is looking pretty safe. You’ve got good health care, great education, good rule of law.”
But most importantly, the local economy is expected to perform well this year and a significant amount of wealth continues to move into the area, he says. GDP is expected to grow about 3.5 per cent, interest rates remain historically low and a continual incoming stream of wealth means demand for housing will remain steady.
“A lot of people coming to seek safe harbour have something that journalists and economists always ignore—wealth. I think it’s a big part of what is happening behind the scenes here that doesn’t get picked up in the doomsday analogies of the unsustainability of prices. How can we have a crash in the market when there are still people coming?”
Carlson says the Metro Vancouver market is balanced. It’s not overheated and is not in a bubble, which would only occur if there were a significant number of empty homes on the market.
He predicts a 10-per-cent price rise in multi-family wood-frame homes, concrete multi-family units and single-family homes currently worth under $2 million. Meanwhile, detached homes over $2 million, prices of which have dipped, will catch up by the fall when foreign buyers realize they can’t remain on the sidelines waiting for a correction that isn’t coming.
Other speakers at the event, meanwhile, noted that Canadians’ attitudes towards rental accommodation are changing as affordability of owning a home becomes more challenging. Canada now has the highest rate of home ownership (about 65 per cent) among developed countries, but with prices becoming more and more unaffordable, renters are a growing segment that includes relatively high-paid younger workers, says Brian McCauley, president of Concert Properties.
While rental households account for about 30 per cent in Canada, that figure is more than 50 per cent in Vancouver and Toronto, he says. Vancouver also continues to lag behind other metropolitan areas in the creation of rental stock, McCauley notes, citing the approval of 14,000 units in Seattle in 2016, compared to just 1,800 in Vancouver last year.
“There is no question there is continuing demand for rental residential. At Concert, we have just under 5,000 rental residential units spread out between Victoria, Metro Vancouver and Toronto, and of this week, we had one unit available,” he says.
“So we know that the demand is there and it is insatiable.”