Construction continues on the Elements development at 66 Avenue and 202 Street in Willoughby. While the real estate market continues to cool, Langley remains a desirable and relatively affordable place for families to call home.

Construction continues on the Elements development at 66 Avenue and 202 Street in Willoughby. While the real estate market continues to cool, Langley remains a desirable and relatively affordable place for families to call home.

Home prices expected to drop but Langley still hot

Langley’s relatively affordable market makes it more desirable than pricier regions, says Royal LePage study

Time will tell if a dire real estate forecast for Metro Vancouver will come to fruition.

A recently released Royal LePage report predicts an 8.5 per cent drop in home prices in 2017 across Metro Vancouver.

It also indicates the market decline would likely be worse if not for the “remarkably resilient” condo sector, which offers more affordable prices, and the region’s nation-leading economy.

“It is expected that Greater Vancouver will experience a near double-digit correction in the new year, as sanity returns to the marketplace, causing the region to give back much of the appreciation witnessed in the first half of 2016,” said Randy Ryalls, general manager of Royal LePage Sterling Realty.

“However inventory will continue to be the story in the new year, as any movement within the market will be exaggerated at their current, extremely low levels, meaning that if sentiment remains unchanged, conditions could worsen and prices may fall even further.”

The report also predicts foreign investment in Metro Vancouver will wane further due to the foreign buyers’ tax and China’s imposition of new, stricter requirements on currency conversions.

Langley however, remains a desirable place for homebuyers, which could affect prices in a positive way.

Langley saw aggregate home prices rise 25.7 per cent to end the year at $786,720.

While markets in pricier parts of Metro began to struggle in the latest quarter, the report says many buyers were drawn east to areas like Langley in search of affordability, resulting in more sales and competition over listings.

Urbanization phenomenon

Environmental designer Erick Villagomez with Metis Design-Build says, broadly speaking, the urbanization process seem to be a current worldwide phenomenon.

“So, in the absence of any specific global ‘events’ that could interfere with the current trends, one can assume that over the long-term real estate will continue to increase in all successful urban centres — including the Lower Mainland,” he said.

Villagomez doesn’t believe the real estate bubble will burst.

“All other things being equal, it (rising real estate prices) has been continuous for the past three decades, over which time many have predicted the ‘bubble bursting.’”

Demand will lower, says TWU prof

Meanwhile, a Trinity Western University economics professor foresees the real estate market in Metro Vancouver continuing to cool over the next two to five years.

Sung Min Yoo, Associate Professor of Economics at TWU’s School of Business, said while it’s “extremely difficult” to forecast interest rates, he believes they will increase in the near future.

“With higher interest rates, the mortgage rates will be also higher,” he said. “From that perspective, demand for housing will be much lower over the next two to five years.”

Before the foreign buyers’ tax took effect in August and created a cooling effect on the market, the price of real estate in Langley and across Metro Vancouver and the Fraser Valley skyrocketed.

As a byproduct of the hot summer market, B.C. Assessment said the typical increase in property assessments was 30 to 50 per cent, depending on the neighourhood and other factors, for detached houses in most urban parts of Metro Vancouver and the Fraser Valley.

And some homes have seen increases well over 50 per cent.

Yoo said two key factors led to the extreme price jumps in the Greater Vancouver area over the past two years.

“The first factor is an extremely low interest rate, which is translated into extremely low mortgage rate,” he offered.

“With such an extremely low mortgage rate, many home buyers could pay relatively reasonable monthly payments, even though the housing price was extremely high.”

That, he said, caused an increased demand for housing and a “huge appreciation” in housing prices.

The second factor, he said, was the increase in foreign demand for housing in Greater Vancouver area, prior to the introduction of the foreign buyer tax affecting real estate transactions in Metro Vancouver.

“A significant portion of this foreign demand was from China. Since the Canadian dollar has depreciated (over the) last few years, the cost of buying (real estate) in Greater Vancouver in terms of foreign currency has not increased significantly even though housing prices in Greater Vancouver area has increased significantly in Canadian dollars,” Yoo said.

“This increase in foreign demand was another major factor.”

While Yoo said it is very difficult to predict what will happen to foreign demand for housing in Greater Vancouver area but noted, “it is expected that the foreign demand would be reduced over time.”