“What is happening in the Real Estate Market?” This is a question that is often on people’s minds, but it doesn’t come with a simple answer as many factors are in play at any one time in real estate. Interest rates, Government regulations, inventory, buyer confidence, and seller perceptions of the market are all pieces of the puzzle when it comes to the Squamish real estate market – as with most markets.
We will take a quick look at all these factors to see how they are played out in the past 6 months and what might be in store for the rest of 2018.
The Bank of Canada raised interest rates again on July 11th by a quarter of a point to 1.5%. Many of the major banks had already pushed their lending rates up in June in anticipation of this increase. While not a large increase, it will have an impact on borrowing ability for some purchasers.
We have been dealing with new Federal regulations around how financing is done since the beginning of the year. These changes have made it more difficult to obtain a mortgage. The hope was that the new mortgage stress test would ensure that buyers wouldn’t get squeezed when interest begin to rise. The test has meant that roughly 20% of households that could qualify for a mortgage on December 31, 2017 could no longer qualify for the same amount of funding on January 1, 2018.
On the Provincial side, there have been several new taxes, primarily designed around speculation. This has left the marketplace with some uncertainty. There has also been a complete overhaul by the Superintendent of Real Estate which has impacted how Realtors interact with the buying and selling public.
All these influences have combined to impact the local market – most definitely slowing it down, but maybe too much?
Overall, there has been a decrease in all 3 of the major market segments in terms of the number of properties sold so far this year. Single family detached home sales are down 38%, while townhomes sales have dropped by 31% and apartments by 16% so far in 2018 as compared to 2017.
One would think that with such a noticeable slow down in unit sales, prices might be moderating but that has not happened yet. Since the beginning of the year townhomes have seen a 12% increase in price, followed by 9% for apartments and then single-family homes at 7%. The main reason for this lack of price adjustment so far this year could be 2-fold.
- Inventory has been increasing but is still below historic norms.
- We are still seeing buyers move to Squamish from the Lower Mainland where property values are higher.
What to expect moving forward
The Lower Mainland is now experiencing below average sales volume that will have an impact on Squamish through the second half of 2018.
In addition to this, we are now seeing that buyers no longer feel a sense of urgency to buy which was a common sentiment through 2016/17. Also, with regulations in mortgage rules and increase interest rates many people can no longer afford home ownership. Inventory is growing slowly so there is time to look around to see what is a good fit for a buyer’s needs.
Sellers still have visions of 2017 pricing in their heads and are often the last group to realize that the market is no longer in their favour. We are currently in a transition towards a balanced market where buyers and sellers negotiate (and perhaps leaning towards becoming a buyer’s market). This is expected to be the norm for the remainder of the year.
In Squamish, the summer trends usually demonstrate a slower pace of sales and inventory but this year we are seeing an above average number of properties coming to the market. How this will impact the overall market moving forward has yet to be seen but it would suggest that a rise in inventory should see a slowing of price increase.
To stay up to date on the current market or how it may impact your specific situation, contact one of our local, full time advisors to get all the answers you will need.
Information deemed to be accurate, all information taken from the MLS Database – June 30, 2018