October 11, 2011
Real Estate Ready to Set a Steady Course
Experts believe the state of the Lower Mainland’s housing market is stable and balanced – and thus an excellent time to buy a new home.
BY TONY WHITNEY
If there was one word that could be used to describe the housing market scenario as 2012 approaches, it would have to be “stabilization.” Most authorities we spoke to believe the industry is in a stabilizing mode which, put simply, means that buyers of homes new or old can continue to count on a secure investment and sellers will enjoy an excellent return on whatever they paid when they bought.
Even so, it’s not been an easy year to make predictions about the Lower Mainland’s vibrant housing market, but the picture has remained encouraging. Prices have continued to strengthen in the “red hot” areas of Vancouver West Side, Richmond, Burnaby (Metrotown), South Surrey and other spots appealing to B.C. newcomers, as well as local people moving up, downsizing, or even those buying a home for the first time. For most homebuyers who’ve invested in one of the more popular Lower Mainland locales over the past 10 years, equity gains have been very substantial.
But what does the picture look like as 2012 approaches? Is a condo, apartment, townhome or detached home still the solid investment it’s been for so long now? We asked two people with extensive knowledge of the housing market in the Lower Mainland to reveal their thoughts on how the market is unfolding.
Don Forsgren, western region president of Canada-wide developer Intracorp, said that on a broad basis, the housing market in the Lower Mainland is “very stable and balanced” – especially in hot sub-markets such as Vancouver West Side and Richmond, though there are locales in the Fraser Valley where prices have dropped a little.
“It’s easy for data to be skewed,”Forsgren said, adding that the average price of a home in Vancouver plummets when the small percentage of super-expensive houses and condos in locations like Point Grey and Coal Harbour are taken out of the assessment.
Said Forsgren: “There’s a strong, stable, solid market in the Lower Mainland with lots of product and strong demand and this has been given impetus by immigration and low interest rates.” He added that there isn’t much of a risk for buyers right now as far as interest rates are concerned and this is a “big driver,” given home prices in the region.
Of course, the geography of the area has always been a key factor. Said Forsgren: “The Lower Mainland is an extremely constrained market from a new-product supply point of view. There’s no over-supply and not a lot of inventory – good choices, but not an over-abundance of products competing for a shrinking pool.” This scenario ensures strength and stability with little risk for buyers and an interest rate situation that’s unlikely to change any time soon. “We can look forward to a good, steady, upward trend,” Forsgren added.
Is this a good time for, say, a young couple to invest in a new home? “Absolutely,” Forsgren emphasizes. “Given the history of home prices in this region, home buying has been a fantastic equity investment over time. They’re not making any more land, which ensures a constrained market.” He added that there’s nothing to indicate that this is “a good time to wait” and pointed out that if current global financial issues can be solved, things will only get better in Vancouver, which is performing well in today’s tough worldwide economy. Said Forsgren: “Locals underestimate Vancouver’s future position in the world.”
Said Cameron Muir, chief economist at the B.C. Real Estate Association: “We’re still facing some headwinds with the lacklustre performance of our major trading partner in the U.S., though this is being offset to some extent by buoyant trade with China.”
Given the history of home prices in this region, home buying has been a fantastic equity investment over time. They’re not making any more land, which ensures a constrained market. DON FORSGREN INTRACORP
Rising unemployment in Canada also casts a shadow, though Muir expects home sales activity to be up eight per cent this year and around three per cent in 2012. Said Muir: “Our economy in B.C. isn’t going to fire on all cylinders until the U.S. is showing some robust economic activity,” adding that typical Lower Mainland home prices would remain relatively unchanged and stable over the next 18 months, with neither strong upward or downward pressure.
Homebuyers have lots of choices and stability will give them more time to consider these choices and get their finances together. “They won’t have to worry about sudden fluctuations,” Muir said. Home sellers face a balanced field, too, and according to Muir, will need to pay attention to how their home shows. “They’ll have to have a fairly sharp pencil to attract buyers to their property,” he said.
He concluded by pointing out that there is no “doom and gloom” on the horizon, but there is some uncertainty in the B.C. economy and international financial volatility has some buyers “sitting on the fence.” The “silver lining” is that interest rates are going to stay low for a longer time than was anticipated at the beginning of the year.