In late 2012 after home sales in B.C. fell to the lowest level since the late 1990s, doomsayers were calling for a severe real estate correction. That didn’t happen. In 2013 sales steadily improved and prices stayed relatively flat. Could 2014 be a shakeup year? To find out, The Province interviewed real estate experts to learn the key trends that will influence next year’s market.
1. Looking back to see ahead — what happened in 2013?
The key word to describe real estate in B.C. this year, experts say, is balance.
According to Sotheby’s International Realty Canada’s CEO and president, Ross McCredie, it was predictable that sales would start slowly in 2013. Buyers were on the sidelines, expecting interest rates to rise.
And there was uncertainty ahead of B.C.’s spring election. The surprise victory of the B.C. Liberals was welcomed by real estate investors, McCredie said, and sales pushed higher through the summer and early fall.
Pent-up demand has been brought into balance now, said Cameron Muir, chief economist for the B.C. Real Estate Association, and sales dropped back below long-term averages in November. Muir said B.C.’s market could soften over the next six months before picking up in the latter half of 2014.
“This is the second year of slow economic growth,” Muir said. “And there was really no employment growth this year, so that has to have some impact.”
2. What’s hot now?
West Vancouver is the hottest market in the Lower Mainland with a nine-per-cent jump in the single-family home benchmark this year, to $1.9-million. And while Vancouver’s west side was down three per cent in the spring, by November the tony market had rocketed back to gain three per cent year-over-year, at nearly $2.1 million for a single-family property.
Areas of Burnaby are also heating up, and Whistler has bounced back by 2.2 per cent year-over-year, as the American economy recovers and foreign buyers re-enter the market, McCredie said.
Among the priciest Lower Mainland markets, Richmond was coolest this year with a 2.7-per-cent drop to $930,000 at the single-family benchmark.
3. Where will it be hot in 2014?
McCredie pointed to immigration from Asia as a bullish factor that will press single-family home prices higher across Vancouver and into Burnaby.
While official data on rates of foreign investment is difficult to track, McCredie believes that in Greater Vancouver foreigners account for about 50 per cent of purchases above the $2-million price range.
McCredie said Vancouver’s market is driven by almost twice the rate of foreign investment as Toronto, the next most popular Canadian market for offshore buyers.
“The reality is that even wealthy Canadians are priced out of Vancouver markets now,” McCredie said. “We see a lot of foreign demand in very specific neighbourhoods like Point Grey. And we think in 2014 you will see continued demand east of Main in Vancouver, and even out to Burnaby.”
4. Why will it be hot?
Some international economists and journalists in the United States recently warned that Canada tops the list of nations with housing markets most likely in dangerous bubble territory.
But McCredie and Muir said the doomsayers are wrong. According to McCredie, Vancouver’s condo market has already corrected and will stabilize at current levels.
And as the city rapidly rezones and densifies, pressure will increase on the remaining single-family home lots, with demand outpacing supply, he said.
As factors that will support Vancouver’s market, McCredie pointed to a relatively strong economy in Canada, ultra-cheap borrowing costs, wealthy baby boomers who are relocating to cities and supporting their children’s’ property purchases, and growing foreign investment.
5. Interest rates — sizzle or fizzle?
B.C.’s real estate market is supported by historically cheap interest rates that are largely tied to economic factors outside the province.
In efforts to stem a financial collapse in 2008, officials in the United States dropped lending rates as low as possible. Because Canada’s economy is linked so intricately with the U.S.’s, the Bank of Canada must follow suit.
There are signs that U.S. officials finally are attempting to curtail extraordinary stimulus efforts, but with cautious steps. That means Canada’s central bank likely won’t raise interest rates until 2015, giving borrowers more fuel to buy real estate.
Muir sees banks raising five-year mortgage rates by 0.5 per cent in 2014. But uncertainty around the U.S.’s unprecedented banking policy could still rile financial markets and impact Canada, he said.
“The big risk I see right now is longer-term interest rates being driven much higher than expected,” Muir said.
McCredie predicted borrowing costs won’t rise meaningfully before 2015 in B.C., and even then, “it would take a three- or four-per-cent” rise to trip up Vancouver’s housing market.
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