- by David Tam
Housing industry leaders say Metro Vancouverites can expect to see single-family home prices continue to fall this year along with some softening in the prices of new multi-family homes. But if you are counting on the housing market to be hit by a true recession, you may end up waiting a long, long time.
Both Neil Chrystal, president of Polygon Homes Ltd., and Eric Carlson, founder and CEO of Anthem Properties, two of B.C.’s biggest developers, told the recent Urban Development Institute’s annual forecast luncheon that they expect the markets to take a breather and “prices to reset” during the year.
They don’t expect the market to be overcome by an enduring downturn because there are too many good things happening in the provincial economy: the employment rate is too robust, unemployment is low, and there are record levels of international immigrants flowing into B.C. All of these factors work to ensure that demand for housing will continue to outstrip the number of new homes being produced.
Chrystal said he expects a “window of opportunity” for buyers this year when builders begin introducing incentives to buyers and selling homes at prices well off the peak of 2018. And while five-year mortgage rates moved up 50 basis points in 2018, he doesn’t expect those rates to rise this year. He noted consumers can still find rates at 3.6 per cent, a historically low rate.
The province continues to enjoy strong immigration from international points, welcoming 53,000 people in the first nine months of 2018 “and by the time the fourth quarter is calculated, we should have a new record year of immigration,” Chrystal said.
“2018 was a very slow year for the residential market. In fact, it was the slowest year of sales activity going back to the year 2000,” he said, adding the bellwether single-family sales market topped out in 2016, while the multi-family market hit its peak in 2017.
Many developers started resetting their prices last fall, staging test launches of multi-family projects where homes were offered for 10 to 15 per cent lower than they might otherwise have been priced six months earlier, he said. The industry also saw some smaller projects get into trouble, where they were either cancelled or buyers were asked to pay more money to ensure the project was completed.
Chrystal had some advice for buyers in 2019: “Join the flight to quality and choose a builder with experience and a successful track record to avoid disappointment.”
Both developers were critical of government for stepping into the housing market and exacerbating what otherwise might have been a routine downturn in a historically cyclical market.
“The slew of new taxes on housing and the federally enacted mortgage stress tests have amplified the slowdown with many consumers adopting a wait-and-see attitude,” Chrystal said.
“I believe that housing market activity will remain slow for the first half of this year. The
single-family market will remain slow and continue to experience further price corrections, and I honestly believe this is a good thing,” he added. “Those price adjustments are long overdue and quite frankly necessary before the market can move forward again. In order for prices in the multi-family sector to stabilize, we must first find the bottom of the single-family market, and I believe this will happen in 2019.”
Carlson also predicted that single-family home prices would further decline this year, but said some of those homes were dropping in price because their prices had been unrealistically high in the first place.
“We have seen slow markets before, and we will see slow markets again. Everyone knows that we operate in a cyclical business, and today things are pretty quiet. But things will get better and probably sooner than we all think.”