Is the Fraser Valley real estate market in the midst of a once-in-a-century boom? The latest numbers for sales activity have not been this strong in the entire 100-year history of the southwest region of British Columbia. But can this real estate boom persist any longer, or will the party begin to subside this year?
Fraser Valley is benefiting from households in Vancouver packing up their homes within one of Canada’s largest cities and finding nearby communities to plant new roots. Since the Vancouver housing market is experiencing record gains, this strong performance is seeping into other close locations, including Fraser Valley.
While there are plenty of reports and commentary regarding a housing bubble, the impressive gains could continue as long as interest rates stay low, and the post-coronavirus economy remains in recovery mode.
So, how great are the numbers coming out of the Fraser Valley real estate market?
Fraser Valley Real Estate Continues Its Record-Breaking Ascent
According to the Fraser Valley Real Estate Board (FVREB), residential sales surged 108 per cent year-over-year in February, with 2,815 sales being executed. This surpasses the previous record of 2,387 sales in February 2016. Housing transactions were also 88 per cent above the ten-year average for the month of February.
Real estate prices also increased across multiple housing types on an annualised basis in February:
- Single-Family Detached: 19.9 per cent to $1,163,400
- Townhomes: 10.1 per cent to $600,300
- Apartments: 5.3 per cent to $450,900
In recent months, industry observers have been focusing on supply to gauge where housing prices are heading in the near-to-medium-term. The latest figures suggest that prices could continue to climb.
FVREB data found that new listings advanced 28 per cent in February compared to the same time a year ago to 3,265. Total active housing stocks tumbled 28 per cent to 4,120, the lowest ever for the month. The average number of days to sell a single-family detached home and townhouse was 21, and apartments took an average 35 days to sell.
For real estate agents in Fraser Valley, the activity “is new territory for us,” said Chris Shields, President of the Board said of this month’s record numbers, in a news release.
“We have never seen such consistent and persistent demand for housing in the Fraser Valley,” Shields noted. “What’s fueling the demand is the combination of record‐low interest rates and the response to the pandemic. It’s not something that could have been predicted and it has created a very complex market for buyers that requires the knowledge and expertise of a professional. For family‐sized homes, prices climbed 3 to 5 per cent in February alone and sold on average in three weeks. We understand the stress and frustration with the market currently and we’re here to help guide and protect home buyers.”
Is Fraser Valley losing its housing affordability status?
Will Homebuyers Get Priced Out of the Fraser Valley Housing Market?
It is estimated that it takes approximately 11 years to save for a down payment in Fraser Valley. While this is substantially better than the 26 years it would take to save for the minimum in the Greater Vancouver Area, it does point to how much growth the Fraser Valley real estate market has witnessed over the last year.
Unfortunately, many Canadians have seen their incomes reduced or bank accounts depleted because of the coronavirus-induced economic downturn. Although the economy is in a recovery phase, the only thing that would help newcomers in the homebuying market – in the short-to-medium-term – is if the property bubble burst. But is this likely to occur anytime soon?
The Bank of Canada (BoC) recently announced that it would be the first central bank in the G20 to taper its aggressive $4 billion-a-week emergency liquidity programs that were initiated last year. Does this mean policymakers would soon pull the trigger on a rate hike? BoC Deputy Governor Toni Gravelle has quashed the proposal.
“We will eventually get down to a pace of QE purchases that maintains — but no longer increases — the amount of stimulus being provided,” Gravelle said in remarks to CFA Society Toronto. “It won’t necessarily mean that we have changed our views about when we will need to start raising the policy interest rate.”
But why would rate normalisation help Canadian homebuyers? There are a couple of reasons. The first is that the lower the rate, the less Canadians can expect to save (“if may savings aren’t growing, I may as well invest it in real estate”). Second, if rates are lower, homebuyers have access to greater amounts of capital at reduced borrowing costs, so they can increase home prices through bidding wars and ghost bids.
From the beginning, the Bank of Canada has said it does not anticipate an upward move on interest rates for a couple of years. Therefore, the Canadian real estate market – and places like Fraser Valley – could continue to see sky-high valuations and rapid sales activity for a few more quarters.