Coming into 2013, we have just endured 6 months of considerably slowed residential market activity, particularly in Vancouver and immediate suburbs. Although this slowdown was not doubt influenced by tightened mortgage requirements, other factors have also contributed such as price levels and a general uncertainty in the local economy. In no way am I predicting an economic collapse but people are certainly becoming more guarded as of late, which I think is healthy. Real estate developers are aware of the reduced volume and have already altered their course as a result. This will help quell any oversupply and we should be contented that they are intuitive as they are.
BC will be facing an election this year which, at this point, certainly appears to be in favour of an NDP government. Most of you will remember our economy and real estate market making a specific come back in 2001, which just also happened to be the end of the NDP’s previous 8 year tenure here. We may very well be entering a period similar to that which occurred from 1993-2001, one that is generally flat and unexciting. This is not only due to a potential upcoming socialist government that has already vowed to increase corporate taxes (which will certainly have a negative effect on business success, which of course results in less employment), but also the federally tightened lending protocols and general world uncertainty in the economy. If we see rising interest rates enter the picture, which is not likely till at least 2014, then we have ourselves significant downward pressures.
In light of these factors, I do not see any more serious drop in property values on the horizon, although may veru will be a slow, mild correction. Prospective buyers are now forced to have saved a significant downpayment, which is good practice in general and, even more so, today. In addition, there is less or no pressure to overpay for properties and bypass proper diligence. Purchases can be made prudently and, as a result of the 10% +/- price correction we saw in late 2012, more affordably. It is still a good climate to buy due to the low interest rates and overall buyer control, if the right deal is in front of you.
Property owners, commercial or residential, should be ensuring their expenses are low as possible and that their investment properties are cash flowing. The viable option of a quick sale and cashing out will be less likely in the coming years, particularly at a guaranteed price level . All should be making sure that their finances are in good order and without having to rely on further loans, which are becoming increasingly difficult to achieve, comparative to the past.
Overall, this will help our economy become more secure and less exposed to wild fluctuations as it has in the United States. This is a positive change as it will allow Canadian real estate to continue to be a safe investment for those around the world which will, in turn, keep the demand steady. In the short term, we should see a brisk spring market coming, largely due to some pent up demand from late 2012.