Long answer: Not only in the Fraser Valley, but all of Canada has experienced the draw to take advantage of record-low borrowing costs that’s having a major rippling effect on real estate, so major that it’s been selling faster than toilet paper. RBC estimated that home resales in Canada increased by 13 per cent in 2020 and predicts sales will hit an even higher level in 2021.
Ultimately, we will say this… regardless of what is going on with the mortgage rates or real estate market trends. The right time to buy a home is when YOU are financially ready. Continue reading to learn more about our key observations for investing this year.
3 market influencers to consider if you’re thinking of investing in real estate this year.
1. Mortgage Rates are going up!
The Five-year fixed mortgage rates are on the way up in response to the growing consensus belief that US inflationary pressures will rise quickly.
Last week, the five-year Government of Canada (GoC) bond yield surged closing at 0.67%, a 10-month high. In layman’s terms, this means that the five-year fixed mortgage rates are going up.
As it stands right now, borrowers have to qualify at the current stress test rate of 4.79%, so an increase in rates won’t have any impact on the amount you can actually borrow but does have an impact on your mortgage payment and amount of interest you will pay.
“At its last rate decision in January, the Bank of Canada said its overnight target rate of 0.25% will likely remain unchanged until 2023, providing assurances to borrowers that now is still a good time to purchase a home” Canadian Mortgage Trends
We shared in our last blog post “How Working from home has Increased Demand for Fraser Valley Homes” extra space has become all the more appealing with the record-low borrowing costs we’ve been seeing. If you’ve been thinking of buying, then now would be the time to take advantage of the low rates that will slowly be on the rise.
If 2020 taught us anything, it’s that nothing is for certain. So, if the 5-year GoC bond yield continues to rise – then this might be an appropriate time to invest in the property you’ve been thinking about and lock in a pre-approval to guard yourself against rising rate risks.
2. An increase in appetite for the sub-urbs.
The manifold impacts of COVID-19 have already resurfaced for many households. There are families that will need to find more affordable housing and leave the urban setting to find that balance. In 2020, we saw an increasing trend of home buyers moving out of the metro Vancouver urban centres and shifting to more space and more affordable housing in the suburban Fraser Valley neighbourhoods.
A projection by, Moody’s, who said in late 2020 that it expects to see “greater resilience in lower-density markets outside Canada’s large urban cores,” driven by demand for properties with more space for working from home. Smaller, more affordable markets, Moody’s said, “will particularly benefit from this trend.”
For many folks during the time of staying home and having time to reflect on what they value most, life in the suburbs, amongst the rolling picturesque farmers’ fields, breathtaking hiking trails, superb bakeries, local farmer’s markets and trendy breweries – working from home and living in the Fraser Valley isn’t such a bad idea.
3. Condos + Townhome demand
One of the unexpected results of the pandemic over the last year has been the lack of supply and strong demand, which has put upward pressure on prices and bidding wars. This unique recipe has made it nearly impossible for first time buyers to compete for sales on properties with multiple over asking price offers. Enter: New condo + townhome developments.
In a report by RBC “In British Columbia, 49 per cent of residents aged 25 to 35 own their home. Of those homeowners, 27 per cent purchased a home since mid-March of last year. Among those who do not currently own a home, 65 per cent say they intend to buy within the next five years.”
Fraser Valley has one of the largest epicenters of population growth in the entire province, specifically amongst individuals aged 25 – 39 years old. We’re noticing that this demographic, which typically falls under the first-time home buyer’s category, are taking advantage of the low borrowing rates and securing their first steps in home ownership with strata investments in the Fraser Valley.
Brendon Ogmundson, BCREA Chief Economist, shared his insights on the disadvantage “Potential first-time homebuyers, largely younger and earlier in their careers, were more impacted by the recession and less able to take advantage of low mortgage rates due to a high qualifying rate.” Read the full interview with the Fraser Valley Real Estate Board here
What really helps and is reassuring to those that are considering investing in a condo or townhouse in the in the Fraser Valley, is that through this pandemic induced market, the price for these dwelling has experienced the least amount of fluctuation. (Athena: Please confirm if this is correct)
MLS® HPI Benchmark Price Activity
- · Single Family Detached: At $1,106,500, the Benchmark price for an FVREB single‐family detached home increased 2.5 per cent compared to December 2020 and increased 15.2 per cent compared to January 2020.
- · Townhomes: At $580,800, the Benchmark price for an FVREB townhome increased 0.8 per cent compared to December 2020 and increased 7.2 per cent compared to January 2020.
- · Apartments: At $439,800, the Benchmark price for an FVREB apartment/condo increased 0.3 per cent compared to December 2020 and increased 4.4 per cent compared to January 2020.
Coming soon to Abbotsford is McKenzie Mews, 3 & 4-Bedroom Modern Family Townhomes, where you can absorb the upbeat energy of a brewery, seek out your style in local boutiques, and watch your kids explore a forest trail. Find everything here that a major city would offer – even a university and an international airport – with the unexpected element of limitless nature at your fingertips. This is where you experience that hard-to-find balance of quality, style, and affordability. Discover more about this upcoming development here.