LOOKING BACK & AHEAD

As the spring season begins, we have observed an increase in absorption throughout Metro Vancouver and the Fraser Valley. The market is continuing to stabilize and even improve as predicted, in line with the Bank of Canada’s decision to hold rates steady from January to April of this year. This has created and confirmed an optimistic outlook for the market.

Looking Back

In our previous report, we correctly predicted the stabilization of the Bank of Canada interest rates during the first quarter and into April of this year. However, the market absorptions in certain areas, particularly the North Shore and South Surrey/White Rock, may have come as a surprise.

We also discussed the new federal ban on foreign buyer ownership across Canada and how the rules implemented could further limit the supply of new housing for Canadian citizens. However, the ban’s implementation only affected 1.5% of buyers in 2021, which was the hottest market in Metro Vancouver to date. The new rules included restrictions on foreign investment in land or corporations above a certain threshold, such as development companies. Surprisingly, it appears that the government heard our industry’s concerns with the latest announcement on March 31st, which made new exemptions to the ban on land and business ownership. As predicted, we have not seen any measurable impacts on the market in terms of buyers due to this ban as it affects a very minimal number of buyers in our local market overall, even at the peak, with just 1.5% of all purchasers being foreign.

We also questioned the need for the stress test for entry-level buyers considering current interest rates. However, there has been no response from our leaders on this issue. Nonetheless, the recent exemptions announced for the Foreign Buyer’s Ban are a positive development.

All the new mayors in each municipality are now firmly in place and are finalizing the setup of their new structures and responses to the new provincial approval mandates. Each mayor seems to be taking a different approach as they work with their staff and implement new policies that may expedite approvals. It’s important to monitor the areas where you are developing for new opportunities in approval speed and density.

The Urban Development Institute (UDI), as well as The Urban Development Institute of the Fraser Valley (UDI Fraser Valley) are excellent organizations to join, as they liaise with each city and keep their members updated on new policies, often before they are implemented. Membership allows the development community to be heard at every level of government and provides an opportunity to provide industry input in the design and implementation of new policies that affect the industry.

For more information on the institute and the various regions you can join, please visit: https://udi.bc.ca/membership/join-udi/.

Looking Ahead

With interest rates having stabilized over the last two consecutive periods and inflation currently at 5.2% at the time of writing this article, we predict at least one more rate increase by the Bank of Canada before the end of 2023. However, there are indications that inflation could decrease, and rates will likely begin to decrease in 2024.

Additionally, we anticipate that various municipalities across the Lower Mainland will implement new policies to expedite development and building permit approvals. Hopefully, this will result in some time and cost savings for the industry as a whole.

Will we see distressed sales of development sites and/or new homes due to the significant increase in borrowing costs for some?

How do you think the market will fare for the remainder of 2023?

What moves do you expect to see from the new local councils and mayors, particularly in relation to development approval processes in the areas of your current development applications or land holdings?

Do you think consumer confidence will remain strong, or will it be affected by the Bank of Canada’s decisions this summer?

Do you believe it is important to participate in the industry through groups such as UDI? Why or why not?

If you have a view you would like to share and/or questions you would like to discuss please contact Jamie Squires at Jamie@fifthave.ca.