Vancouver’s real estate market is still booming, but upcoming trends may slow its ascent. A group of Vancouver real estate experts came together at the Buildex Vancouver trade conference on Feb. 14 to assess the state of the Lower Mainland’s white-hot housing market.
Andre Ramlo, the vice-president of marketing intelligence at the Rennie Marketing Group, said the growth and change in British Columbia real estate is economically driven.
“For the next couple of years, it will be a relatively robust time in British Columbia,” Ramlo said, citing Canada’s leading position in the G7 group of nations with three per cent growth in 2018, and British Columbia topping the GDP among other provinces.
Ramlo also cited historically low mortgage rates as a factor in Vancouver’s skyrocketing real estate market and said interest rates will certainly rise in the near future, since the economy is reaching full capacity.
“This will have an impact on households, but it won’t be significant,” Ramlo said.
Ben Taddei, the COO of Conwest Group, agreed “Vancouver is the place to be in Canada and arguably North America, so the question is: to build or not to build?”
But while “if you’re under 30, you’ve never seen a down market,” Taddei said there are headwinds on the way to slow down Vancouver’s market.
“There’s a downward pressure on prices, upward pressure on costs, and I’m seeing different signals that tell me now’s the time for caution,” Taddei said.
“The green lights have turned to yellow.”
Taddei also pointed to the current economic situation as the reverse of 2008, when quantitative easing flooded the market with cheap credit.
That debt is now being sold into the market, he said.
“It’ll be flooded into the market in the coming years, which will drive the price of debt down and yields up. More debt on markets mean rates go up,” Taddei said.
The panel downplayed foreign ownership and speculative “flipping” as less significant than portrayed by the media, but warned as interest rates go up more buyers may move towards uninsured mortgages.
“Higher rates push more people to non-OSFI (Office of the Superintendent of Financial Institutions) lenders like credit unions,” Ramlo said.
A new OSFI “stress test,” introduced Jan. 1 requires uninsured insurance brokers to qualify against the Bank of Canada’s five-year benchmark rate or at their own contract mortgage rate plus an extra two per cent.
Higher rates do not just affect the lower end of the market, Grant Thornton LLP tax services partner Phil Ross said.
“Interest rate rise also hits higher end properties. It’s not just an entry level issue, so that could put a hit on demand,” Ross said.
In the longer term, Ramlo was optimistic about housing demand in the Lower Mainland. From 2021 to beyond, Ramlo said, 43,000 units a year will be needed.
“It’s the equivalent of a city of Vancouver, New Westminister and Burnaby in the next 20 years. We have to build. We have to add units,” Ramlo said.
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