The Vancouver real estate market is slated for a white-hot year in 2022, following this year’s frenetic activity, says the President of BakerWest.
“I base this on substantial statistics,” Jacky Chan told STOREYS, “which our Minister of Immigration, Refugees and Citizenship rolled out that show we’re on track to accepting over 400,000 new immigrants or permanent residency applicants into Canada. In 2022, we’re on track to exceed that number with a 411,000 target. We’re talking about over 400,000 people coming into Canada annually over the next five years, which equates to around two million.”
Vancouver, the country's third-largest city and one of its main beneficiaries of immigration -- as evidenced by local job creation and, of course, the city’s housing market -- is the most expensive in Canada. Demand for the city’s housing has vastly outpaced resale availabilities and developers’ abilities to provide new supply commensurately.
The Pacific Rim city is a leading destination for arrivals from across Asia in addition to Europeans and Americans, especially as the satellite offices spill out of Silicon Valley and up the coast. Chan says the cost of hiring qualified programmers and engineers in Vancouver is 30-35% lower than it is in Silicon Valley, and he added that, while major Canadian cities are often rebuked for having unfavourable tax regimes, the overhead in a city like Vancouver makes more financial sense than it does in the Golden State, which explains the enthusiasm with which Amazon, Facebook, Google and Shopify, to name a few tech juggernauts, are opening offices in the city.
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To explain the surge of activity Chan forecasts for Vancouver’s real estate market in 2022, he advises analyzing the current preconstruction condo market.
“With preconstruction sales this year, we’ve seen massive towers of 300-450 units sold out in a single day, so demand is definitely there even though supply is always not enough, therefore, prices have to go up,” he said. “The preconstruction market in 2022 will be very strong because of the lack of inventory in the real estate market, which discourages conventional offerings as well as the ability to purchase existing properties, of which there aren’t enough on the market to begin with, because you’re fighting with 20-30 people for one home, whereas, through preconstruction sales and marketing, we’re focused on selling entire projects with a minimum of 20-30 units all the way up to 500-plus units, and when we do that it is way easier to service demand for a multitude of people at the same time. The reason is that developers and marketing agencies can gauge and arrange the allocation for buyers. For example, if a particular floor plan of unit A is not available on the 10th floor, we can offset that demand and offer the same floor plan to the same client on the ninth or 11th floor, and that satisfies their demand.”
Underpinning continued, if not stronger, preconstruction condo demand in 2022 is less buyer competition, which keeps prices in check as opposed to bidding against 20-30 other desperate buyers for a scarce low-rise dwelling.
In the second half of this year, condo developers were confident enough to launch new projects in Vancouver, reasoning that the worst of the COVID-19 pandemic is in the rear-view mirror, and absorption has been robust enough to ensure launches continue through next year.
“In some cases with the projects we oversaw at BakerWest, some were sold out within the first month, and all of them were sold out in a two- to three-month period, and this trend will definitely continue as there isn’t enough supply,” Chan said, adding that could change depending on the area. “Vancouver, its downtown, north shore, Richmond and the Fraser Valley service different purposes, and different price points exist in different municipalities.”
Indeed, the multiplicity of municipalities reflects a variance of demand cycles. From Abbotsford to the Tri-Cities -- Coquitlam, Port Coquitlam, Port Moody, and the villages of Anmore and Belcarra -- supply is lagging far behind demand, Jamie Squires, Senior Vice President and Managing Broker of Fifth Avenue Real Estate Marketing, says.
“In every region, there’s been extremely high demand and a lack of supply, and there are only a handful of certain types of listings, depending on which neighbourhood you want to be in. Where you used to have 50-100 townhomes, now you only have five listings and people to compete with, which I don’t see changing much,” she said. “Once projects come through municipal approvals and they launch, they sell out in a month, some even in a day -- although we try not to do that because we feel we haven’t worked in our clients’ best interests if we do that.”
New build presales have spiked in Surrey City and North Delta with 2,543 high-rise sales, 1,071 low-rise sales, and 626 new townhouse sales. Squires noted that few immigrants have arrived in Canada during the pandemic, yet sales have been persistently elevated because, in addition to buyers within the province, BC real estate has gotten a lot of attention from purchasers wanting to flee dreaded Prairie winters. And as the pandemic appears to be waning and more newcomers start arriving in the country, demand is set to arise again in 2022, albeit by only 2-3%, Squires estimates.
“The biggest issue now is a clear lack of supply, so as long as the government does something to push cities and municipalities to be more accountable to approval times, I don’t see a huge influx of supply happening to stabilize this market,” she said.
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Kelowna is experiencing unprecedented presale absorption, according to Scott Brown, Development and Marketing Lead for BC at Peerage Realty Partners West, because, unlike in the aftermath of the Great Recession when urban cores generally rebounded before suburbs, the coronavirus has created conditions for an obverse recovery this time around.
“In Kelowna, Victoria, and you could argue Kamloops is a third, prices have gone up significantly,” Brown said, ”but you could still find a wood frame project in downtown Kelowna for $600-800 per square foot. Kelowna is attractive to younger and older people moving out of Vancouver because they’re getting price appreciation there. Langford, Kelowna, Greater Victoria and the Okanagan are driven by the exodus of higher density areas of BC, like Vancouver, and the older buyers want to live in smaller, less busy cities, while a significant amount of young people are flexible with their work arrangements and are choosing to enter those markets because they can still afford a home and work remotely.”
As a result, Brown anticipates 2022 will be a very strong year for home sales in the province, although perhaps the pace won’t be as torrid as has been in 2021. Brown also believes the rapid pace of appreciation will stabilize by next year, but if it exceeds this year’s pace, it will not be by much.
“It will either be a little over or a little less because of the chronic undersupply.”
Victoria has one of Canada’s most expensive real estate markets, and although sales declined by 24.7% year-over-year in October, it doesn’t tell the whole story. According to internal data from The Condo Group, demand has continued growing which means that a new-listings dearth is the likely reason and it will most likely persist into 2022.
“The local municipalities are under a great deal of public pressure to expedite the approval process for multifamily projects moving forward, however, even if every project that is going through the approval process gets approved, it can still take a long time for buildings to complete,” Tony Zarsadias, President of The Condo Group, said. “Despite challenges in the resale market, the market for new, presale condominiums and townhomes remains equally strong and developers are doing their best to add more inventory. There are solutions out there.”
The appetite for new homes in Victoria is so strong that The Condo Group sold out the first phase of a townhome development in the Tillicum area without the help of a show room. As a result of buyer fatigue in the resale market, Zarsadias anticipates even more growth in the market’s new build segment.
“Many hopeful homebuyers have been losing out amid multiple offers over 2020 and 2021,” he said. “With that said, the seemingly imminent increase in interest rates is keeping buyers focused on making a move to take advantage of the historically low interest rates we’ve seen over the past two years. As we’ve seen historically, when rates start to go up, we typically see buyers take a temporary break, reset, reevaluate, and then get back into buying mode with renewed focus.”
