Vancouver’s soft real estate market has done little to relieve the squeeze constrained housing supply is putting on locals.
“Just because the market is slowing, it doesn’t mean this market is not in need of more housing supply,” Matthew Boukall, Altus Group’s vice president of product management, told MortgageBrokerNews.ca. “It takes 24 to 36 months to get a typical project through approval, and a lot of the projects coming to market today were proposed in a different market cycle where they may have been designed, or positioned, for what people could afford back in 2016 or 2017, not today with new OSFI rules and other qualification challenges to buy a unit.
“From a permit perspective, it’s one of most challenging markets to get approvals to market in timely way.”
While it may seem counterintuitive, the 20% foreign buyer tax is having an unwelcome effect on Vancouverites’ ability to find housing.
“The tax won’t have a direct impact on Vancouver residents, but it does have an impact on how many units are being sold in Vancouver because foreign buyers are a big part of the market,” continued Boukall. “The speculative component of foreign buyers caused risk and concern in the market, but if you’re a foreign buyer who intended to buy and rent out that unit, you might not buy anymore, which means we might see a drop in units available for rental.
“For a developer, you may take a slower approach so you don’t rush projects to market. You’re looking for, not just sales signals, but price signals before you bring a project to market.”
On Wednesday, Boukall and Altus colleague Jason Lo spoke at length to a Vancouver audience, providing both forecasts and risk assessments of the city’s housing market.
“The key risk we see today is, while the market is slowing down from a demand perspective with slow sales and price moderation, we’re still at near record levels of under-construction activity, so all the condos that have been sold in the last three years are still under construction, which means developers continue to face cost pressures.
“The second risk in the market is interest rates and qualification for consumers. The challenge is that there may be housing demand within the market, but it’s finding housing you can qualify for, be it new or resale. When we looked at some of our data from an intentions perspective, intentions were up modestly in Vancouver, year-over-year, but among first-time homebuyers it’s dropped.”
First-time homebuyers have typically bought into the market for fear of being priced out, however, today fear of the unknown is dissuading them from taking the plunge. Nevertheless, the federal budget’s incentives for first-time buyers, the full details of which have yet to be released, will inform much of what’s to come in the next year.
“Over the next 12 months, we think there’s going to be more supply in the market, which will keep sales at a reasonably strong pace, but we think it will be a slower year overall, with volumes dropping below last year’s levels. The big unknown is the impact of the federal budget and the election later this year. The specifics and timing of the budget incentives are uncertain, and if it’s truly going to help first-time buyers get into the market, it could contribute to a stronger spring and fall going into 2020.”