Last week we covered Vancouver Real Estate Market Predictions for 2021 and now this week we are turning our attention to the Fraser Valley Real Estate Market and beyond. Scott Brown, President & CEO of Fifth Avenue Real Estate Marketing Ltd. sits down with Matt & Adam to discuss the surprising real estate boom of 2020 and what 2021 holds for the Fraser Valley. Will real estate prices in the Fraser Valley go up in 2021? Are current buying habits a longer-term trend or a temporary fad? Which sub-markets and regions are set to explode? Get answers to these questions and Scott’s top 3 favourite markets in BC for this year. Do not miss this episode!
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Tell us about yourself.
I’m a Surrey resident and I’ve been in real estate for about 30 years. I first got involved in some consulting and then got sucked into it. My experience took me all over the world doing residential marketing with developers. We’d work with them to figure out what the product should be and how to sell it.
In 2010, I realized I needed to be at home more so started to work more in the Vancouver area. I started writing research reports and am in my 11th year of doing that. I then got involved with 5th Avenue about eight years ago. So we work with developers who are looking to create townhome or condo communities and help them figure out the product, bring it to market, and bring people to those homes.
How did you navigate covid and did anything surprise you?
The market was chugging along well before covid. The lowest year for new multi-family was 2019, so we all expected recovery in 2020. But then covid hit. We were shocked how quickly things grounded to a halt; demand fell off a cliff. So we needed to make sure everything was okay – everyone was healthy and clients weren’t wasting marketing dollars.We then began looking at scenarios – what happens if the market comes back in June? In September? In spring 2021? We suspected it might be in June. We moved everyone to work from home and I was shocked how quickly people adapted to the new technology. Even consumers were browsing more online.
I use the terms “fad” and “trend.” Trend is long term. I think this technology that has been born out of covid isn’t going away. I think it’s a long term trend. We saw consumers engaging with us virtually – and being highly engaged. We started to see resale stats come back to life in May and then the new market in late June. It was surprising how fast things came back and continued to over the summer. The fall saw us hitting record sales. How restorative the market was really surprised us.
This reminded me of when I was working in Florida when September 11th happened. We canceled our sales events and told our teams just to build relationships and to just be there. But we then went on a sales run where people wanted out of small apartments or had been putting off buying a house and now wanted to.
It also reminded me of when I worked in the Philippines with a luxury product in July 2008. It was the only place in the world where you could sell something in 2008. But when I began writing my report on Vancouver in 2009, I told people not to underestimate the resiliency of the metro Vancouver market. While the rest of the world had a global recession, Vancouver bounced back so quickly. I knew that could happen again, which is what we’ve seen.
The big surprise for me was December. I assumed it would be closer to a normal December. But if you look at the Fraser Valley numbers, it doesn’t look like covid hit at all. The resale market grew, year over year, by 29% – the same growth we had been expecting before we knew about covid. That was remarkable! It was the strongest December sales on record in the Fraser Valley.
In the new year, consumers still want to have the research available online but they also want us to have a presentation centre. When they come in, they don’t want many people to be there and they want everyone in masks. But when they do show up, they’re ready to buy.
So the tire-kickers have disappeared. Do you think that’s for good?
I do think the consumer expectation of “give me more information” is the evolution of the internet. Back in the day, consumers came to the sales centre to get all of the info that we had. These days, the consumer knows so much more. They want to do that research online and at home. We just fill in the content gaps.
Some investors are buying product online without ever having seen it in real life. I still think primary users want to see and feel before purchasing, but these online tools aren’t going away anytime soon.
Can you talk more about the resiliency of the Vancouver market and what you saw back in 2009?
Unlike Toronto or Calgary or Montreal or even Chicago, Vancouver is not conducive to sprawling wider and wider. Our central markets are geographically constrained – you have to tear something down to build something. We have built-in scarcity.
We have an aging population and a good climate, apart from the rain. There’s also the global appeal of Vancouver. We didn’t hear about foreign buyers at all this year. It’s impressive that our market improved like it did without immigration. But immigration will come back.
We also have municipal and provincial governments that are trying to do right by the consumer but are restraining the supply side. This means it’s always a seller’s market. We saw sales come back but prices didn’t go down this year. CMHC said they were going to fall 18% six months ago, and is now saying they will fall in 2021. But will they?
End users led the recovery, not investors. It was end users buying townhomes and single family detached homes. People wanted more space. Working from home was new to many people in North America because corporations worried about their culture. But most people are adapting well to working from home, saving time on their commute, etc.
We’re also seeing the development of the suburbs. You don’t have to compromise your lifestyle to afford a home. There are a number of centres outside of Vancouver that are acceptable to live in. Downtown Vancouver used to be where you wanted to live but that’s not the case anymore. Once hockey and other events come back, we might see that demand. But people in Port Moody, Coquitlam or Burnaby are close enough to get to downtown but don’t need to be there every single day.
So we’re seeing a lot of people leaving the downtown core or leaving dense areas for more space. Would you say that’s a trend (long term) and not a fad (short term)?
It is a trend. But like any trend, you may see shifts. Those who push too far east or north may retreat back in. We see this with downsizers. They move to Chilliwack or Hope to get more space and then a third decide it’s too far, and move back to Surrey or Langley. But they don’t go back to Vancouver.
There’s a barrier to multi-family living in Vancouver. It’s just too expensive. When we had our Olympics in 2010, all of the restaurants and bars raised their prices ahead of time. But no one complained when they came into Vancouver. So I predicted the same thing would happen with our real estate. We’re now at $2000-3000 per square foot in downtown. That market is forcing people out of downtown unless you’re super rich or renting.
The downtown market is detached from the rest of Vancouver. It didn’t recover the same as the rest of the market in 2020. A lot of projects are stalled and we only saw 6-8 new sales. When a developer starts a new project, they have to sell so many units in nine months or else they can’t market anymore. The government changed this to 12 months to increase supply. Some people are now trying to move this to 24 months, which would benefit the consumer.
How does the trend of moving out for more space extend to other parts of BC?
We have a sister company called Epic Real Estate Solutions that does what we do in the Okanagan and Kelowna. They’ve seen a lot of people now living in Kelowna who keep their job in Vancouver. Affordability is still an issue. I think Kamloops, Kelowna and Penticton may see an exodus of younger people. Kelowna still has that base though of restaurants, universities, shops, etc.
The island will see some growth. We still have an aging population and those people are leaving Vancouver and central areas. They’re moving to the Okanagan or to the island. Their lifestyle has changed. We’re seeing pre-retirement buyers from Vancouver buying places in Kelowna that will be second homes for now, and eventually become permanent homes during retirement.
So we’ve talked about how purchasing habits have changed, that people are heading to the suburbs and realizing they’re not the same suburbs of the 90s, that there is a shift towards Burnaby being the centre of the region, and that downtown may not be the centre anymore. How are you looking at the region? Where are the opportunities for investors?
Investors have different objectives than end users. It’s interesting to look at property values in downtown Vancouver compared to New West or Surrey. The rents are not as far apart as the sale prices are. If they can’t afford to buy new in downtown, investors will move outside of the city centre. They’re hoping for population growth and that prices haven’t peaked yet. So unless something unique comes along in downtown Vancouver, investors aren’t willing to pay the premium that an end user may in downtown.
Scarcity will always be a problem downtown so a long term downtown investor will be sitting on gold. But most investors are buying silver in Burnaby or Surrey. Where exactly are these silver projects? Anywhere on transit. We’ll see densification along transit lines that haven’t been built yet, where there are still opportunities.
We’ve seen growth in Surrey and that will likely continue for years to come. Is there one submarket you’re really excited about?
I don’t have a favourite. But what is going to happen in the Okanagan in the next 10 years is fascinating to me. A lot of people are grieving Vancouver’s growth. I’m interested in greater Victoria. But Okanagan is what I have my eye on.
What are your thoughts on the Fraser Valley and Vancouver markets in 2021?
The resale market will probably go up 25-30% but I think it will be volatile. I think there will be a month of doom and gloom, and then it will turn around. But I think it’ll be less volatile than I originally thought because people have hope. People live in the future. People will be hopeful before they even have the reality of the vaccine. But a spike in cases could slow things down, like we saw in Ontario over the holidays.
Overall I think Vancouver and the Fraser Valley will grow. And that’s mostly end users – real people with real needs.
On the new side, we had our lowest year. In 2021, I predict 20%+ growth and the same in 2022 – barring a significant global economic event. The suburbs are becoming more of the overall market share of both resales and new product.
This market is fascinated with real estate. Even in Toronto they don’t talk about it this much. But that does create a bit more anxiety for people than necessary. If you’re not selling your house, it doesn’t matter what the market is doing. The media doesn’t specify which exact community they’re talking about. Which market are they talking about? And does that apply to your home?
In Australia, their approach to foreign buying is positive and negative. They want foreign buying because it takes risks and enables developers to work faster. Foreign buyers could only buy new and not resale, which avoided the cost of single family homes being driven up. I think we should be encouraging investment in new product. If covid taught us anything, it’s that we definitely have a supply issue.
The stress test in July 2018, in combination with the other taxes, slowed the camel’s back – not quite breaking it. The current low interest rates will probably allow this market to continue in 2021/2022.
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