This post was written using a transcript from the above video. It’s been edited for clarity.
What drives real estate prices?
PAUL: Over the last couple of years we've seen lots of movement in the real estate market, both locally and nationally. Prices shot way up and now it looks like things are pulling back. What causes these big price shifts?
TONY: Supply and demand. When there isn’t enough housing inventory but demand is strong, buyers compete for a limited amount of housing and prices go up. This is what happened on the Sunshine Coast during COVID, particularly among younger buyers with families. This cohort of buyers saw BC’s Sunshine Coast as a viable option, because they were going to be working remotely and we have good internet here that can accommodate working from home. And because these young people could work on the Sunshine Coast, BC without needing to commute on the ferry, this became a very attractive place for people to live.
TONY: But now we’re seeing the opposite. People are being called back to work, or at least realizing that they’ll soon need go back to an office somewhat regularly. In addition to that, we've seen BC Ferries making cancellations across all of its routes due to a lack of staff. I believe the unreliable nature of the ferry system has been putting people off coming to the Sunshine Coast, whether to consider living here or just coming over to look at homes. That means now there are fewer young buyers then there were a couple of years ago.
TONY: I think there's still the same amount of retirees considering Sunshine Coast real estate, but they’re no longer competing with a huge volume of younger buyers. Add to that interest rates going up and things like proposed bylaw changes to limit short-term vacation rentals, and I think a lot of investors are looking at the market and saying, "I’ve made my money so I’ll sell my investment property because the market is changing." All these things combine and we see prices for Sunshine Coast real estate softening.
TONY: Officially, the Sunshine Coast is still a seller's market. However, there is a lag on housing stats, and I actually believe we’re now in a balanced market. I think the June 2022 stats will come out later this month (July 2022) and they’ll confirm that we are, indeed, in a balanced market. How quickly that we're going to move towards a buyer's market, I don't know. We've never seen inflation at this rate. We've never seen interest rates go up this quickly. There’s also a lot of press talking about the slowing housing market. Put these things together and the Sunshine Coast is seeing a lot of inventory come on the market while demand drops. That's what’s affecting prices.
In-demand property typesPAUL: Despite demand cooling, are there any property types that are more in demand than others?
TONY: The majority of people that were coming to Gibsons and Sechelt and everywhere else on the Sunshine Coast over the last two years, have been looking for detached homes and freehold non-strata properties. And a lot these new buyers had families so we ran out of single-family homes pretty quickly. When that supply dried up, we started to see a spike in condo and townhouse prices.
TONY: I find attached properties are like the canary in the coal mine. Those properties that were the last to see price increases in an up market are the first to see a price decrease in a cooling market. What I'm noticing is that while houses have slowed down, attached properties or strata properties have slowed down faster.
TONY: That said, it does depend on the specific property and the specific development. If developments are geared towards our primary buyer group (which is retirees), then they're still doing okay. But in general, I did notice a spike in condo and townhouse prices a few months ago. And now those prices are balancing out ahead of detached homes.
When will detached prices drop?PAUL: Does that mean sellers have a few weeks or a few months before prices really start to pull back on houses?
TONY: I don't know how quickly that’s going to happen. I mean, it's changed very, very quickly. I've been doing real estate on BC’s Sunshine Coast for nine years and I've been through a downturn before, but there was no global pandemic and there was no huge immediate doubling in value spike. So I don't know how quickly or how much detached prices are going to pull back. I would imagine by spring 2023, the market will be pretty flat by that point, and then we might start to see some appreciation from there. But who knows what unknown factors in the future are going to have the biggest effect on the market?
TONY: I'm sure that interest rate increases to combat inflation are having a big effect. We're seeing that in real-time. But I'm hearing that there are segments in the market - think $2M+ or $900,000 and under - where there are still quite a few transactions happening. But there’s a soft spot in between those two price points. I haven't got enough data from the market during this downturn to be able to give an accurate prediction. The other unknown is how much of an effect people talking about the market changing is impacting the market. There seems to be a lot of buyers sitting on their hands, saying, “I'll wait and see what happens.” It becomes a self-fulfilling prophecy.
TONY: The market is definitely in a state of flux. The best advice I can give you if you have an investment property or you are looking to sell, it's better for you to get it listed, than to delay. We could very well see an even bigger drop-off of buyers once kids get out of school, as is being predicted by the travel industry. There’s a belief that a huge portion of people that are going to travel this summer, and I think a lot of people may put buying a home on the back burner while they focus on other things, rather than worrying about the real estate market.
Baby boomers driving demand on the Sunshine Coast, BCPAUL: The further we look out and try and make predictions, the foggier it gets. With that in mind, do you expect that 5, 7, 10 years from now, property prices will continue to increase?
TONY: If you’re willing to hold for 2-5 years, I think no matter what you buy, you're going to be okay. We’re seeing a correction right now, which I think was bound to happen. We couldn't continue to see the level of property appreciation that we have seen to this point. I believe that what's going to happen is we're going to move to a buyer's market next year. And I think it’ll take some time for the market to really find its bottom. But overall, during the pandemic, people became more aware of the Sunshine Coast and how close we are to Vancouver, and that it's a great place to live.
TONY: That overall exposure and increased awareness may protect us from seeing too much of a drop in prices from where they are now. I think we'll see some drop in price, but then that'll balance out. We're still not seeing a huge amount of inventory. It's all compared to what we have been seeing over the last couple of years, and so we are going to see an adjustment. Sellers, specifically, have really high expectations that their house will sell in three days and that they’ll get a huge amount of money for it. But in my local experience, primarily in Gibsons, I'm seeing that it's taking a lot longer to sell, and there are lot fewer buyers inquiring. I haven't been seeing as many multiple offers as I was seeing before. I think it's a natural cycle, but I think sellers should be adjusting their expectations.
PAUL: This year or next is the year that most baby boomers will retire. Do you think a mass of retiring baby boomers means long-term strength for the Sunshine Coast?
TONY: The Sunshine Coast’s primary buyer group is baby boomers. I think the Sunshine Coast is the second oldest demographic in BC, and I think Parksville is the first. If there are more baby boomers retiring, then that's going to help the Sunshine Coast balance out the value of our properties, given that demand from millennial buyers appears to be dropping off. Any homes or developments that appeal to baby boomers are going to be in demand once concerns over interest rates and inflation subside and people are comfortable buying into the market again
Buyers hoping to time the marketTONY: I think some people are serial waiters. They think, "Oh, the market's going down, I'm going to wait. Let's see what happens." And as long as you're planning on living in a home and holding it for 3-5 years, normally you’ll do relatively well.
TONY: I'm seeing a lot of buyers that are quite keen, because they've been pre-approved at a lower interest rate than what’s available now. If they had to re-qualify at our new higher rates, they'd be approved for $100,000 or $200,000 less, so they want to buy while they've got that original pre-approval in place.
TONY: In the long run, if you can get into a piece of property, you're likely better off buying now than trying to hedge and wait for the market to change. For some buyers, prices will probably never drop enough for them to want to pull the trigger.
Balanced vs buyers’ marketTONY: We're moving toward a balanced market. But compared to what we've been experiencing, a balanced market is, in my mind, a buyer's market. In a balanced market, buyers can write an offer without necessarily having to pay full price. They can get an inspection, and they're not competing with however many other buyers. Sellers aren't holding offers and trying to force a fear of loss through competition. It's a more civilized way to buy a home.
TONY: It's been a really tough time to be a buyer. I think over the next few months, it's going to get back to being a more balanced market and a more civilized buying process. And providing inventory continues to increase, we're going to see supply and demand even out.
Realtors need to adjust to the changing marketTONY: It's very important when you're buying a house to work with a local agent that can give you good advice. I often see agents from different areas parachuting into the Sunshine Coast, either because they’re a family member, or they're new to the industry and starting out, or they're not that busy in their own market. And I think sometimes they can get caught trying to operate in a market they don’t fully understand. For that reason, it’s really important to work with a local agent that's giving you good advice.
TONY: A lot of friends and associates are primarily buyer's agents, and the last couple of years have been a bit of a nightmare. Some agents have been losing clients because people are suffering from buyers’ fatigue. Buyers write three or four offers with these Realtors, but because of the intense competition, their offers don’t get accepted. Even though their agent is excellent and is doing everything right and trying to protect them, some buyers get to a point that they start to think there's something wrong with their agent. So they end up moving forward with another agent and go from there.
TONY: I think Realtors that have had it really easy for the last little bit. Listing agents specifically, have got to wrap their heads around the idea of once again working for a living. It's a different stage in the market.
Tony’s upcoming July 2022 listingsPAUL: What do you have coming online in July?
TONY: I've got a lot of exciting commercial stuff coming this month. There's quite a few restaurants that are going to be listed. The funny thing with restaurants, or commercial listings in general (especially in a small community), is that when a business is listed, people will say, "Oh, what a shame! They've gone out of business." It's quite hard for the business being sold, because when the business is publicly listed for sale, they tend to get flooded with calls from people saying, “I've got gift certificates," or, "I've got an order in," and that kind of thing. Not everyone realizes that business owners successfully run their business for a long time, and then their circumstances change or it’s time for them to retire, so they decide to sell. A business being listed for sale isn’t necessarily a negative thing. It's a good opportunity for people moving to the Sunshine Coast and wanting to invest in themselves and the community. It’s also a chance for buyers to pursue a passion that they want to try out.
TONY: I have a few great restaurants that are coming this month. As far as residential properties, I have some excellent listings right now that cover the full spectrum. I have a nice 1-acre piece that's going to be listed soon, as well as a very nice family home that’s centrally located between Upper and Lower Gibsons. I’d recommend checking out my website. And if anyone has questions, just give me a call. I'm always happy to chat and give some advice, not necessarily with any strings attached.
CALL TONY TODAY
If you’re not already working with an agent, call me when you’re ready to buy or sell and I’ll guide you through the busy and competitive real estate market on BC’s BEAUTIFUL Sunshine Coast.
Tony Browton - TrueBlueRealty.ca
Personal Real Estate Corporation
RE/MAX City Realty (Gibsons)
Email: Click here to email Tony
Personal Real Estate Corporation
RE/MAX City Realty (Gibsons)
Email: Click here to email Tony
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