LOOKING BACK & AHEAD

As projected, the Second Quarter of 2022 has seen the market balance and normalize alongside the rising interest rates. Further anticipated interest rate increases for the remainder of 2022 are anticipated by the Bank of Canada that may further slow our market before it starts to increase again.

Looking Back

Hindsight is always 20/20, but we can say we saw the market slowdown coming. When those that have experienced multiple market cycles saw townhomes in Langley selling for about $1.6M plus GST it felt like the peak and it was just that. Not long after sales started to slow. More developments came to market and starting price points dropped and/or incentives started to be introduced. From decorating allowances to the latest one-dollar deposit to purchase at one development.

Those that are new to the industry seem to have felt that the sky was falling. This was and is not the case, this is the market normalizing or balancing. In fact depending on which neighbourhood you are selling in the pace, absorptions and prices may be stable, other areas where prices simply escalated too high and too fast for the market to absorb are seeing the pace of sales slow and some price decreases that when looked at month to month seem huge, but when looked at year to date are not as dramatic as we think.

There was room for prices to go down and this was obvious to the most experienced. How much room is yet to be seen, however realistically with rising costs due to inflation and our rising rates there probably isn’t as much room as the dooms day believers may think. Last issue we asked how housing policy would influence the municipal election this fall. We discussed the market being based on supply and demand. The demand is coming even with supply or not as strong as the supply in some neighbourhoods so prices are remaining level or seeing a dip. Some neighbourhoods continue to have supply scarcity and demand outweighing the supply with prices that have either leveled off or are still increasing, albeit at a slower rate. We are not able to assess how housing policy will affect this year’s municipal election yet, but we will be able to see it in the next issue.

Looking Ahead

Looking ahead, we see further interest rate increases from the Bank of Canada to battle inflation over the remainder of 2022. We see the prices that we have watched fall over the last quarter stabilizing as costs will have to align with price in the end. Costs are rising and will continue to rise in the foreseeable future inline with inflation. Wages will need to increase, increased fuel costs equate to increased transport and delivery costs for materials, all lead to product cost increases.

Not to mention the increased permitting, DCC and CAC costs being implemented by many city halls as we speak. This means prices may dip a bit more but there is not room to go down much further therefore we predict that we are close to reaching a stabilized market in terms of prices over the remainder of 2022. Because of this inelasticity in price, absorptions may slow even further in some areas until the demand can outweigh the current supply at those prices. Based on previous market cycles we predict this to happen in spring or summer of 2023 when the market should theoretically begin to increase again as it has with previous cycles.

With all these changes in the market occurring we will ask again, how housing policy may affect this year’s municipal election in October? What will the impact of the election be on our housing supply in each city?

We saw near unprecedented change over the last election cycle with many city councils elected to stop or slow development that helped lead to the record-breaking price inflation over 2021 and the first quarter of 2022.

Will housing be a major factor in who you elect? It should be.

When will immigration start to have an impact on our market again? It was missing for all of 2021. How long will this current last?

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