Metro Vancouver- Real Estate Market

Last edition this section started with the quote “What a difference a year makes…”. This Summer edition has a sequel comment. A full year’s sales in half the time. Chronic undersupply and sustained demand in a gradually more post-pandemic world meant that in the first half of 2021 more homes already sold than the year end total for the majority of years in the past decade. Despite moderate cooling in the overall market the multifamily market in Metro Vancouver certainly does not appear to be cooling anytime soon.

Having collaborated on this report nearly 50 times over more than a decade, I have come up with my own metrics of market performance. For instance, a quarterly sales figure below 2,000 indicates a slow or challenged market (read: 2019) and quarterly figure of 4,000+ represents an accelerated or heated market. So what do I do with two quarters of 6,000+ units sold? That means that 13,155 sales in the first half of 2021 which is 75 percent higher than the year end figure in 2019 and 24 percent more than the remarkable full on pandemic influenced year end total in 2020. I knew it was possible, but honestly did not see that happening. What’s next?

Looking Back

For starters, we wondered if the first quarter was an anamoly. Apparently not. Now, we did expect a hot market overall for 2021 as developers continued to price offerings appropriately for the location and targeted consumer. That being said, a predicted movement in the stress test and inflated costs which put additional upward pressure on pricing as expected did not quell the heat. Despite increases over a month of more than $100 per square foot in some areas absorptions continued at a pace two plus times the quarterly ten year average.

We also mentioned that low interest rates, population growth and future immigration including a possible exodus of Canadian passport holders out of Hong Kong could result in sustained sales and market growth through 2021 and beyond. We have yet to see the coming immigration wave but borders will open. In the Spring edition, we identified increased multifamily interest from outside the province. This is occurring nearly everywhere from Bear Mountain on Vancouver Island to the Kootenays and Purcells. We also expected BC residents post-vaccination vacationing and who want to re-locate away from larger and less affordable areas and folks pre-retirement buying to be a positive contributor to this projected sales growth throughout BC. This is definitely the case especially in the playground that is BC and despite the smoke and tragic losses associated with wildfire season.

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Now at the end of Winter, we projected a 20+ percent growth in annual absorptions, despite the ongoing saga of the pandemic. At a 24 percent increase over last year already, we were too conservative.

We did expect moderate price appreciation necessitated by concerns related to inflation with respect to development and construction related costs. I would say we are now beyond moderate.

Looking Ahead

We do expect when 2021 has come and gone we will be looking at a gold or silver medal absorption year. It would only take another 6,000 unit quarter to achieve that.

We do not project 6,000 sales sold per quarter in the second half of the year. We do project project 4,000 to 5,000 which is still impressive.

We do continue to foresee: a re-emergence of demand in downtown High Rise product; notably accelerated pricing and absorptions on the North Shore and Burnaby; continued appetite for wood frame and new high rise offerings in the Guildford Town Centre area, in Surrey City Centre and with the vicinity of all the future SkyTrain stations along Fraser Highway right to downtown in the City of Langley.

You will recall High Rise was the top selling product type year to date. It is set to resume its throne fuelled by suburban interest. Speaking of the suburbs, we expect that when 2021 is said and done the suburbs will represent a larger share of market than ever recorded. Relaxations with respect to how and where people work and the ongoing housing supply and affordability challenges make this a relative easy prediction to make.

As our team at Fifth and at our partner organization Baker West advance, we continue an internal dialogue asking:

6,000+ units sold in two quarters in a row and little mention of the “f” word – foreign buyer. And immigration based demand builds at our borders waiting for entrance.

When will that wave/these waves happen? We do not foresee this until 2022. Will it be earlier? What will the impact be this time around? Another wave of 6,000+ units sold quarters?

How deep is the demand for Skytrain oriented investment and end user demand on the Broadway corridor and in Surrey/ Langley?

At the present time, the demand seems insatiable resulting in sell out after sell out and experiencing price escalation partly due to costs that seriously challenge the old norms of how certain neighbourhoods and offerings should be priced. Does the future hold more of the same? What premium ceiling exists for these corridor offerings?

The older I get the less I like surpises. What will the biggest surprise of 2021’s second half be?

Could we see 7,000 units sold in one quarter? Could we see Burnaby High Rise prices exceed $1,500 per square foot on average? What is the highest price a woodframe project achieves? It is already approaching $1,000 per square foot in North Vancouver and actually making sense. What next?

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