In a time of crisis, messaging is everything, so like with coronavirus, as we take seriously what medical professionals tell us, so that applies to the real estate market, projecting how the landscape will likely look after the health crisis blows over.
Western Canada, specifically British Columbia, has seen a downturn in the luxury real estate market, even recessionary in scale, with the introduction there of a 15 per cent tax on foreign buyers purchasing homes of $2 million and over.
That tax, introduced in 2017, meant to curb out-of-control housing prices, injected uncertainty into the market, and Vancouver especially saw a precipitous market drop. When talking new projects, fewer shovels have been hitting the ground, since developers need 60, 65 per cent pre-sales in order to get financing.
According to Engel & Völkers, Vancouver began 2019 the same way it finished 2018 – the number of sales remained slow and prices saw a decline. However, the second half of 2019 saw a “rapid change in sales volume primarily from the local market and an uptick in interest from Hong Kong due to recent unrest in the region.”
That was in the lower to middle price segments, though. International buyers (especially from China – previously the primary driver in Vancouver’s luxury market) in the high-end segment slowed significantly.
However, with a resurrection in the local market there, Engel & Völkers was projecting an increase of prices in the upper market of four to seven per cent in 2020, as buyers and sellers become more familiar with the market’s new reality (including a longer duration between listings and sale, and a more stable, locally driven market). Bottom line – sales activity is picking up as the market still works its way through a transition, the reports says.
With the onset of the coronavirus and the perception of Canada outside these borders as a safe harbour to put your money, it has people in the industry asking if foreign buyers will come to B.C. to buy in even stronger numbers post virus, despite that arduous 15 per cent property tax. That’s a $300,000 hit on a foreigners buying a home there for $2 million. That isn’t pocket change.
Canadian Prime Minister Justin Trudeau has received due credit for steadfast leadership during the crisis so far, as our national government has made the right decisions on how to best contain the spread and communicated those decisions with clarity. No one in this country should be confused about what we should be doing going forward to help contain this, as we all pull in the same direction.
As Cameron McNeill, Executive Director and Partner of MLA Canada, sees it, while there will likely be a short interruption in market growth because of coronavirus (6-12 weeks), not only in B.C. but nationwide, as a result of the crisis, the strong market fundamentals are still there, and Canada is positioned for a big bump in sales numbers and housing prices this Fall, and forward beyond that.
“(The upwards trajectory in B.C.) has not been hot like the Toronto market, in values and in sales volumes, but measured growth, in a sustainable way,” he says. “Typically, the last segment to fully recover is on the luxury end.”
MLA Canada is a prominent Western Canada real estate sales and marketing company, offering market insight to developers, working with every product type, from condo’s and single-family homes to larger, mixed-use masterplan communities. MLA Canada’s service offerings include advisory, project marketing, media strategy and buying, sales, lease up, and administration and customer care.
Those market fundamenals are led by a stable economy, favourable climate (at least in the case of Vancouver), livable cities, a shortfall in housing supply (again, especially in Vancouver), a stable banking system, and a stable immigration system that sees more people from around the world relocating here (61 per cent of Canada’s population growth in 2018 was comprised of new immigrants).
Now you can add the relative stability and positive image of our healthcare system amid an international health-related firestorm to that list.
“Canada is the blue chip real estate investment option globally,” McNeill says. “If you are an affluent person aboard, Canada is welcoming immigration. Canada is the go-to place. People during turbulent times like to move towards tangible assets, and real estate is that definition.”
The unrest in Hong Kong was starting to make B.C. more attractive for luxury buyers again despite the foreign buyer tax. The high-end market in B.C. was driven by foreign buyers, so it will be really interesting to watch all this play out in the coming months, as it also relates to major Canadian markets like Toronto and Montreal.
“I do worry that coronavirus triggers a global recession and we’ll have real job loss and income loss from Canadian households that will have a trickle down effect on the real estate market,” McNeill says. “But even if that happens, relative to other place on the globe, Canada will still be considered a top destination to raise a family, so we will continue to see that strong growth.
“Real estate is a long-term gain. People should be thinking five, seven, ten years out. It is a blue-chip value play. I know the luxury customers we deal with have that long-term view. There is going to be tremendous demand for Canadian real estate in the next 10, 20, 30 years.”
Top image: Metchosin, B.C., home for sale, imagery via Instagram/Sotheby’s