Weak Inventories Fuel Record Home Prices

Sales and prices in the Lower Mainland hit new highs in 2021

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While 2020’s frenetic real estate market activity surprised industry players given COVID-19 restrictions, it was more surprising that 2021 topped it with sales and prices across the Lower Mainland. This year, aside from an initial slight 4% decline in January sales in the Greater Vancouver area, this trend appears to be continuing with overall sales 25% above the 10-year average.

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The single biggest factor contributing to rising prices and the multiple-offer craze is a lack of properties, say those in the industry. The inventory is very low, confirms Keith Stewart, economist at the Real Estate Board of Greater Vancouver (REBGV).

Keith Stewart, economist at the Real Estate Board of Greater Vancouver (REBGV).
Keith Stewart, economist at the Real Estate Board of Greater Vancouver (REBGV). Photo by Fourni /PNG

“We were just over 5,000 at the start of the year, and at 5,600 after what we saw in January. I worry if it’s below 10,” he says.

The same lack of inventory extends to the Fraser Valley where prices have seen dramatic increases with detached homes in South Surrey up 47% and townhouses up 37%. A single-family detached property in Abbotsford, from December 2020 to December 2021, increased by 46%, according to Larry Anderson, chairman of the Fraser Valley Real Estate Board (FVREB).

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Larry Anderson, Chairman of the Fraser Valley Real Estate Board (FVREB).
Larry Anderson, Chairman of the Fraser Valley Real Estate Board (FVREB). Photo by Fourni /PNG

Anderson says low interest rates are one of the factors driving the market, but thinks the unanticipated lifestyle changes brought about by the pandemic have also had a significant influence. People working from home who have moved to a larger space to accommodate a home office has been an important transition.

“The other transition is that many companies will keep the permanent hybrid solution, so you don’t have to go to the office. Or you work downtown, but guess what? You can work from Kelowna now” “Anyway, you were thinking of moving up there, why not now when you can work remotely?”

The move to larger properties meant many buyers were looking beyond their existing area.

“We’ve had two of the busiest years we’ve ever had in the business,” says Philip DuMoulin, of the DuMoulin-Miller Group in South Surrey, adding that he and his partner Sandra Miller have barely had a day off. lately. year. They added extra staff to deal with the surge in business.

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“I don’t think anyone could have expected what happened, especially going into COVID. In March 2020, we were going, ‘uh oh we better get ready for the freezer.’ And if you had asked all the real estate agents, they would have said the same thing. It’s going to be a long period of no sales, but obviously everyone was shocked, quite the opposite happened.

DuMoulin agrees that the increased demand has been fueled in part by people in the Lower Mainland moving further afield because they could work from home.

“They were selling in town and looking to buy something potentially with land and come to the suburbs because they knew they wouldn’t have to travel… They wanted a better environment to raise children, which means more bigger gardens, bigger houses and bigger lots,” he says.

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Even with pressure from people leaving Vancouver for more space, Salina Kai of Rennie & Associates Realty says the city’s market was so busy that the past year was one of the best of her career.

Salina Kai, of Rennie & Associates Realty.
Salina Kai, of Rennie & Associates Realty. Photo by Fourni /PNG

“I think for everyone, COVID made them realize that if they hummed and felt like making a change, that really pushed them to make the change. People’s circumstances have changed, whether it’s family structure or just the need for more space,” she observes.

Stewart says any property that had certain qualities of a single-family home, a front door, outdoor space and at least 1,000 to 1,200 square feet, was just as hot as single-family homes.

“If you look at the prices for single-detached homes and townhouses in the same neighborhoods, they were at the same rate. Houses were a bit more expensive, but the pace of change was the same,” he says.

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Another change was that 2021 saw all-time record sales for apartments. Stewart says there was more supply because people were selling and moving to the suburbs. As he says, people progressed, “They still had to sell to someone. Someone had to buy it. They couldn’t do that if there wasn’t a market for a condo in Yaletown.

Kai confirms that this trend is continuing as she recently sold a 2,100 square foot Yaletown waterfront condo listed for $5.5 million in one day. “He signed up in the afternoon and accepted the offer that evening. It was a very good offer that the seller accepted from day one,” she says.

While the busy market benefits sellers, it can be difficult for buyers trying to find a property amid low inventory and multiple-bid bidding wars.

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“It’s been a bit of a tough year in a lot of ways, especially on the buyer side,” says DuMoulin. “If you’re a real estate agent and you’re in a situation where there are sometimes 15, 20 and sometimes 30 offers, which is what we experienced this year on one of the detached houses. It can become daunting as a buyer.

Kai agrees it’s frustrating for buyers and multiple offers contribute to higher prices, adding that it’s impractical to turn to comparables when they no longer seem to matter. “Something that sold two weeks ago, something similar coming back to the same complex on the same street, it’s not 5% or 10% more. People just pay what they can afford in that price,” she says.

Anderson says the continued rise in prices for multiple offers and properties being sold for excess demand is creating barriers for first-time buyers.

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“It becomes incredibly difficult when there are multiple offers, lots of pressure and things are overselling,” he says. “Also, you get prequalified for a certain number, you get all excited, and then you find out that the product sold for a higher price than what you qualified for. So, at what price are you actually buying? »

With the arrival of the spring market, which traditionally means more inventory, a possible rise in interest rates and the onset, in DuMoulin’s words, of buyer fatigue, prices could stabilize or potentially soften. .

“It’s not like prices suddenly stop going up,” says Stewart. “What’s happening is that more and more people can’t buy at the price. There are fewer and fewer people making offers. Fewer homes are selling. More homes are on the market, more stuff lying around, more options. The heat sources for these increases dissipate.

What is certain about this market, as has been demonstrated with COVID-19, is that anything can happen that could easily drive the market up or down making it difficult to predict a direction .

“We have a two-week crystal ball where we say, ‘listen, that’s why I would list it, and that price is good for the next two weeks. A sale may occur and it could increase by $100,000. It could change that quickly,” says DuMoulin.

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