Strong economy, low interest rates, demand will keep driving up costs
Jim Jamieson
Province
The B.C. real-estate market is taking a breather, but the same fundamentals that stoked value in 2006 will continue to drive it this year, developers say.
Attendees at the Urban Development Institute’s 2007 forecast luncheon were told by several speakers yesterday that Western Canada’s economic strength, low interest rates and the ongoing discovery of B.C. by out-of-province and out-of-country buyers will continue to spark price appreciation across the board.
Peeter Wesik, chairman of developer WesGroup Income Properties, said he doesn’t see the market reacting with price increases of 10 to 20 per cent as was seen in 2006.
“What we saw in the last quarter of 2006 is the tail end of a phenomenon called over-listing,” Wesik told a group of fellow developers. “That’s when you see your neighbour’s house selling for more than you ever dreamed, so when it’s time to sell yours you decide yours is better, plus you put in a new hot water tank, so you ask 10 per cent more. But at some point the strategy fails and at the end of 2006 buyers sat on their hands and there was a slow value correction.”
Wesik said he sees the status quo continuing through the spring.
“I think a correction is very healthy,” he said. “I think we’ll be back to a normal market by the mid-point of this year. There will be price appreciation by the end of 2007.”
There is still demand in the market, he added, but it must be the right product and the right location.
Wesik said property in B.C. is under the microscope by out of province and foreign buyers like at no other time.
“Any property in B.C. that is easily accessible by car or plane from Alberta, especially anything on the water, will have someone from Alberta saying ‘how much?’ and then writing a cheque,” he said.
Wesik added that B.C. is attracting buyers of residential and recreational real estate based on international rather than local values.
“This is an important trend to understand in terms of the affordability of housing in the Lower Mainland,” he said. “Vancouver will always have the highest or among the highest real-estate value in Canada because of this.”
Wesik said affordability can be addressed by encouraging density next to public transit through mixed-use development.
“It won’t necessarily mean it will sell for less dollars, but it does mean you can live without a car,” he said. “We estimate the savings will allow the borrowing of an extra $100,000 on a mortgage.”
Wesik also predicted that commercial rents will continue to rise because the high cost of new construction will make adding new office supply difficult.
© The Vancouver Province 2007