House sales are declining across the region, and prices are also starting to drop.
In Surrey, sale prices have fallen but not as precipitously as in some other areas of the region, such as West Vancouver, the west side of Vancouver or Richmond.
In most neighbourhoods, prices did not rise as dramatically, so the fall is more gradual. South Surrey and White Rock prices did rise more than in many other neighbourhoods south of the Fraser.
While most people welcome a drop in prices, hoping this could lead to housing becoming more affordable, there will be significant ripple effects.
In Surrey, one of the most significant effects will be on the construction industry. While the number of detached homes being built has declined significantly, in part due to lack of affordability, the construction of apartments and townhouses has been going full tilt. This is happening in all areas of the city.
Construction is one of the most significant employers in Surrey.
There are many thousands of people working in construction, and many other businesses that supply the construction industry. Real estate, furniture and housewares, financial services, insurance and many other industries also depend on a continual supply of new homes in Surrey.
Sources within the development and construction business are suggesting there will be sharp drop in activity once the projects currently underway are complete. This will likely lead to layoffs and a jump in unemployment.
One factor in this is oversupply. While many apartments and townhouses are being built, there is a limited number of buyers who can afford them.
Recent studies show that younger people have to save for 10 years or longer just to assemble down payments in the Greater Vancouver area. While interest rates seem to be stuck at low levels, the Canada Mortgage and Housing Corporation stress test required for many potential buyers assumes rates could go up. This is already keeping many buyers on the sidelines.
Real estate analyst Dane Eitel is expecting prices to keep falling for at least another year.
He is also suggesting there will be a flood of condominiums on the market over the next couple of years, as projects now underway are completed.
A new federal program to assist new homeowners is likely to be almost useless in boosting sales in this area, as the maximum price levels set for eligible homes are much lower than many homes in Metro Vancouver have been selling for.
If prices do keep dropping, it may become more worthwhile.
Housing is a basic need for people. The last half-decade has been a crazy time for housing, and people with lower incomes have been squeezed in many ways – from higher rents to evictions. Some have even ended up homeless.
Declining housing prices are a generally good thing – but they, too, will have an effect.
Frank Bucholtz writes Wednesdays for Peace Arch News, as well as at frankbucholtz.blogspot.ca – email frank.bucholtz@gmail.com
