June 2022 Pre-Sale Real Estate Market Insights
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In our July 2022 episode of the Fraser Valley edition of the Presale Pulse President of MLA Canada Ryan Lalonde, and Managing Director for the Fraser Valley, Brittany Reimer sits down to give you the latest pre-sale and resale data, as well as some trends we are seeing in real estate across the Fraser Valley.
“Sales slowed by about 7% from the previous month in the Valley. Although sales have been declining throughout most markets - not just the Fraser Valley - appreciation or the value of your home still continues to increase year over year. Since last May, HPI has increased 22% throughout the Fraser Valley and this includes all product types.”
– Brittany Reimer, Managing Director, MLA Canada Fraser Valley.
PRESALE ACROSS THE FRASER VALLEY MARKET
On July 13th, we saw a 100 basis point hike to the overnight rate from the Bank of Canada, 25 more points than expected. This has a big impact on existing homeowners and those looking to get their foot in the door. While this is necessary in the Bank’s ongoing fight against inflation, these shifts will be felt by home buyers, but likely not in the way you expect. Its is believed that rising costs will not remove the demand for new homes, merely shift when they happen, and where.
Pre-sale homes are a great way for buyers to enter the market under today’s conditions. Presale benefits can be seen as two-fold right; giving the buyer entry at today’s price point with extra time to save for their future mortgage, as well as buying today but not needing to qualify for your mortgage until the project completes.
Central Surrey & North Delta continue to be the golden child of the Fraser Valley, leading the way in both active inventory and sales as homeowners continue to seek more space and value. Projects saw the same month absorption of 21% for new supply across the five projects that launched.
A few notable projects in the Fraser Valley include Jim by Quanterra Developments and Park & Maven by Jane Properties. Updates to the Fleetwood SkyTrain station expansion are expected to start in 2024 with bidding for the project at the end of this year.
Land Transactions Take a Hit
Land prices, like with most resale product, have grown exponentially in the last two years in the Fraser Valley. The so-called “flight to the suburbs”, driven by flexible work from home policies and the desire for more space led to many developers acquiring land in traditionally less developed areas. The average PPSF of these transactions increased by 19% year-over-year, as developers chased more and more of these development opportunities in a very hot market.
But with input and labor prices now going up, and the market cooling, many developers who bought land over this period are now seeing their expected profit margins tighten. Depending on the investment goals of the developer, they may choose to push through and launch the program, or choose to hold and wait for a higher return on investment.
That decision will come down to several factors. Financing and pro-forma details will no doubt inform much of that, but in large part, the developer’s current land portfolio and holdings will also be important to consider. Because market shifts are affecting submarkets differently, developers with diverse development portfolios will have more flexibility and more opportunity to sit and wait. They can pick and choose to proceed with a development in a well-performing sub-market, while holding off on others.
Due to shifting market conditions, we have been seeing a significant downturn in new land acquisitions, as there was only one reported large land sale in the Fraser Valley in June. This is a huge change from the first quarter of the year, which saw an average of 30 low-high density land transactions take place per month.
SALES TO LISTING RATIOS IN THE FRASER VALLEY
We are seeing similar numbers as Greater Vancouver, where both townhomes and condos are still in a seller’s market, detached sits in a balanced market territory at 13%, even verging on a Buyer’s market. This is a big change from just a few months. Since detached product tends to lead in trends, we can expect townhome and condo product to trend toward balanced market territory in the coming months as well.
For the latest real estate market data on Greater Vancouver, watch the latest video featuring Ryan Lalonde and Suzana Goncalves.
We want to hear from you! If you have a real estate question that you'd like us to talk about in our next Pre-Sale Pulse, submit your questions to us.