A Changing Tide
If you have ever been into the beach sports, you know that a high or low tide can set your activity plans on hold until the ocean restores its levels. This can seem like it takes forever yet it eventually happens; this also ties in largely to the ice cold condo market of the last two years. Struggling to sell with enough equity to purchase again in the future is on the top of many condo owners minds. Is not that prices have come down a ton that is the problem, because they really haven’t in many cases. The problem is twofold.
First, many condo owners bought very short term. Everyone knows a story in Vancouver or the Fraser Valley of someone who bought and owned a property for 25 years, eventually sold that property and made 8 times the amount they bought it for originally. What a cool scenario, right? Well in the case of so many condo owners, they have not planned long term. Owning any piece of real estate in this “new market,” a market where competition is stiff and buyers are savvy, makes 3-5 years way too short of a period to turn a condo to make profit. After you pay out your mortgage, lawyer and real estate fees, property transfer taxes, and still have enough to cover a down payment for your new home of 5%, you can’t win in this period of time. The market would have to go up by SUBSTANTIAL amounts to make this doable for so many who thought short term. With so many out there competing for such few buyers (in the grand scheme of things) that if you are not the best listing on the block, you stand a chance of not selling. That leads us into the other problem… New developments.
The new developments popping up all over our cities are putting a huge strain on the resale market for your condo. When a developer can offer a brand new condo, 10 years newer than yours with a bit less square footage but with all new and shiny finishings, all for a competitive price, of course buyers are going to lean towards that. Why wouldn’t they! With all the new product consistently hitting the market, it puts a huge strain on anyone in a condo that bought at a high or has not built significant equity.
But wait! There is good news to this story… Condos are destined to improve in price, it is inevitable. With the city of Surrey and its aggressive plan for growth, we are always going to witness new towers and buildings going up all over the Fraser Valley, which is what a growing city does. As demand to live in Surrey and outlying areas builds, so will the price of your condo improve. The more demand, the higher new development prices will go. With the new mortgage rules in effect this summer, buyers are also more limited to what they can afford. The young couple who once could buy a townhome just a few months ago are now limited to less affordable condos instead. Once this reality sinks in, that young couple can either decide to continue renting for a few more years to save up funds, or jump into the market with a condo.
Just like the tide and then night sky, our real estate market also has cycles. We have seen the down side of the condo cycle and now it is time to witness the upturn. Given some time to come around again, condos will surely improve in demand which will in turn drive up the prices. Just wait on the shore a little bit longer and the tide will come in.
Until next time,