by Scott Brown, President & CEO of Fifth Avenue Real Estate Marketing Ltd.
It is coming to the end of the honeymoon period for the new NDP government. I wonder if much of our industry still feels as uncertain as I do with respect to what to expect in the coming year from the government.
There is plenty of rhetoric expected. Here’s hoping for more consultation with industry stakeholders prior to implementation. The Liberals didn’t exactly get passing grades on collaboration and communication, i.e., HST, Foreign Buyer Tax, etc. I wonder if the NDP will try to do better. Despite the aforementioned price escalation, the condominium market supply levels remain down as projected and development remains a sustained “green light” rated opportunity in all market areas throughout Metro Vancouver. We do expect a 4,000+ quarter. Unlike in years past where developers have often opted to defer a late-year launch to the first quarter of the coming year we expect the opposite. Market conditions being what they are and given the uncertainty with respect to the mortgage stress testing and further government intervention in the coming year, we expect developers to do whatever it takes to, as they say where I grew up, “make hay while the sun shines”. We expect buyers to do likewise in advance of the New Year.
So… What is on our minds as the days shorten and the holiday season approaches? There are a number of questions that are top of mind at Fifth Avenue. These include:
What effect will the new consumer financing “rules of the road” have on the start to 2018?
Last year cold and snowy weather dampened the start of the year and was largely to blame for breaking the yearlong consecutive 4,000+ units sold per quarter streak. Will there be a cold front this year? Could it be with respect to mortgage qualifications?
How sustainable is the investment demand for pre-sale condominiums?
This year Fifth Avenue will sell approximately 3,000 new multifamily homes. Given the markets we concentrate on, the majority of the homes we offer are bought by end-users. In 2010 in one speech about the Fraser Valley, I likened the investor to Elvis and cautioned that he had left the building. The King is clearly back in Port Coquitlam, Ridge Meadows, Surrey, White Rock and Langley. What is driving this interest this time? Certainly, relative affordability has part to play? But…how sustainable is this demand?
How much higher will prices go?
I cannot recall a quarter with this escalation in pricing. Pricing new offerings almost require one to suspend recent memory and more traditional ways of rationalizing pricing. Without sounding pessimistic, we do caution our existing and prospective clients to have a backup plan if aggressive pricing is not accepted by the market or conditions change. We certainly spend more time talking and thinking about in-elasticity/elasticity of demand and pricing thresholds than we do simply talking price per square foot. The question we ask most: “How much higher will these go?”
Written by Scott Brown, President and CEO of Fifth Avenue Real Estate Marketing Ltd.