A one-day “flash sale” in Surrey City Centre may be a signal that housing prices may finally start to move appreciably lower.
The May 31 sale reduced prices by 25 per cent in the Belvedere condo tower and attracted hundreds of potential homeowners and investors. The level of interest was a sharp contrast to what is happening with many condo developments in Greater Vancouver. Sales are not strong, and many developers, who count on investor and owner-occupier pre-sales to finance the construction, are having difficulty even getting the projects off the ground.
Developer Square Nine Developments made 78 homes available in the sale. Two days later, 63 of them had been sold.
Prices were an average of $725 per square foot, compared with the market rate of about $1,125 per square foot.
Something has to give in the housing market. Housing of all types is priced far too high for most first-time buyers to even consider.
Prices, which shot up partly as a result of COVID work-from-home situations in 2020 and 2021, have remained stubbornly high, even when Bank of Canada interest rates spiked from 0.5 per cent in early 2022 to five per cent in summer 2023. While rates have now fallen from those highs, getting into the market still isn’t possible for a large number of people.
Government hasn’t helped. While all levels of government claim to be working hard to solve the housing shortage, many of their policies do the opposite. Much of the cost of housing is due to government-added costs, such as development cost charges levied by municipalities and Metro Vancouver.
The province has initiated a number of programs which seem to put a target on the backs of investors — notably the ban on short-term rentals. While the idea was to put more units into the rental market, the effect is to drive investors away. That means that needed housing cannot be built.
Nor has the province done anything about the property transfer tax, which is a big burden for home buyers. The high cost of housing just adds to the final tax bill.
The federal government charges GST on new homes, but has just introduced a measure to eliminate it for new homes under $1 million and reduce it for new homes valued at up to $1.5 million — for first-time buyers. It has also promised to help municipalities deal with development cost charges. These measures could definitely help.
There has to be a steady supply of new housing coming onto the market to meet current and future demands. This includes ensuring that there are enough skilled people to build new housing and renovate existing units. Dealing with this at the governmental level means having all hands on deck and working collaboratively — but that approach is not being followed.
There also needs to be a much greater emphasis on non-market housing. The federal government must take the lead there, as it has done in past housing shortages. It has the financial muscle and established agencies, such as Canada Mortgage and Housing, to do so.
There are many uncertainties these days. Rising unemployment levels, uncertainty about trade relationships and continued higher prices cause many people to hesitate about major decisions. A significant drop in housing prices would be a good step in the right direction.
Frank Bucholtz writes twice monthly on political issues for Black Press Media publications.
