This post was written using a transcript from Tony's January 2023 podcast. It’s been edited for clarity.
TONY: The Sunshine Coast, BC real estate market had a tumultuous year to say the least. The benchmark price for a detached home at the end of January 2022 was $900,000 and it peaked at nearly $1,050,000 in May. Then, from spring to November 2022, prices fell on average of 2.6% per month. Numbers for December aren't available as we record this, but if that 2.6% number holds, expect the Sunshine Coast to close out 2022 with a projected detached home benchmark price of around $870,000.
PAUL: That's a pretty dramatic drop in a pretty short period of time, isn't it?
TONY: Absolutely, it is. But it's not all doom and gloom. There is a silver lining out there, I believe, depending on your situation.
PAUL: Which would be?
TONY: If you've bought in the last six months and you find yourself having to sell, then the drop in benchmark price is going to have an impact on you. But most people, if they bought longer than six months ago, the price is probably adjusting back to where it was when they bought. This drop isn’t going to affect everyone.
TONY: From a buyer's perspective, obviously, things are looking up. Buyers had it tough for 18 months, and now it's a much more civilized environment in which to be buying. And I think that in the new year, once people start listing homes again, I think it'll be a more balanced market and there’ll still be transactions. If you're selling a house that's lost some perceived value but then buying back into the same market, this dip in the market doesn't really make that much of a difference to you.
Busy start to 2022 on BC's Sunshine Coast
PAUL: If we look back to the start of the year, the market was still hot coming out of what is traditionally a slow time of the year. There was still a lot of demand in January, and then we saw prices climb up a little bit until the spring. Between January and May, we had a little bit of a run up. And what do you remember the market being like that time of year?
TONY: I was amazed. We rolled right into January 2022 and sales were going strong. We were doing the same volume of sales that we were doing in summer the year before, which was a record amount of sales. So it was just like, “When will this ever end?”
TONY: The main driver in the market were the younger buyers that were thinking they’d never have to go back to an office, and the Sunshine Coast is a beautiful place if you don’t need to commute to Vancouver. These young buyers relocated here and enjoyed all of the niceties that a small town life affords them while still getting paid their salary from a company in the city. And I think that reality kicked in. Many factors took the shine off the apple for young buyers, not the least of which was staff shortages at the ferry, and people not being able to get accommodation here. These new arrivals realized that there are fewer things happening on the Sunshine Coast than in Vancouver.
TONY: Young families that moved here realized that we have a great outdoor lifestyle for retirees or people over a certain age, but there isn't a lot of infrastructure or restaurants or anything specifically set up for kids other than soccer and that kind of thing. But people coming from Vancouver are used to certain facilities and amenities and programs for their kids - things we just don't have here. So I think that realization caused some of the appeal to drop off. We are not seeing those young buyers anymore, especially because they have to go back to working in an office. That really was really it. There was a whole lot of energy at that time with younger buyers thinking, "Oh, we're going to move to the Sunshine Coast," and that created a real influx of activity and buyers. But Vancouver is once again attractive to young families and we're back to more of a retiree-centric market.
Canadian interest rate increases
PAUL: The market peaks in May and then we start to gradually slide down in price until coming to here the end of the year. And between the peak in May and November (November is the last month for which we have official numbers at the time of recording), the market's fallen off 15%. And I'm going to attribute that to a certain demographic not as excited about being here as they once were, but interest rates must also be a factor. How much do you think interest rates played into our cooling market?
TONY: As we saw interest rates climb, we saw a slowdown in the market. We started to see it before the interest rates increased, but higher rates exacerbated it. People qualified for less money, there were less buyers out there. We did see a little bit of a rally where people wanted to use their low rate pre-approvals, so that was a late little spike that we saw. But now, things have slowed down and there are fewer people qualified for less money.
TONY: The thing that's balancing out the housing prices here is a lack of housing inventory. If what we predict is going to happen early next year comes to pass, you're going to see a lot of Airbnbs get listed because owners are maybe a little bit behind the time and haven't gotten their temporary use permits lined up. And if our local municipalities start enforcing these new bylaws (which is still up in the air), then you could see a localized surge in Airbnbs being sold.
TONY: Also, with interest rates being where they are, we could see people not being able to afford the mortgage payments on their properties if they don't have that short-term rental income. There could be owners that, even if they wanted to rent their homes out long-term, they may not be able to service the debt on the rental amounts without the increased revenue from a short-term rental. If that happens, owners may be forced to sell.
TONY: If we start to see a bunch of inventory come on the market, I think you'll see further price reductions, probably more than the 2.6% per month we've seen to this point. If that happens, I'd imagine that will lead to the market bottom. From there, we would start to see a balanced market climbing in a regular real estate cycle.
Inventory protecting housing prices on the Sunshine Coast, BC
PAUL: In November of this year, I believe we had 23 detached home sales on the Sunshine Coast. That’s the lowest number we'd had in two years. The lower inventory is matching that lower demand. There isn’t a lot of owners putting their homes on the market. Do you feel like that lack of inventory is propping up Sunshine Coast prices a little bit?
TONY: Yes, I think the lack of inventory is holding prices up. I think once you start to see people listing their homes because they need to sell, then you're going to see price adjustments in an effort to get ahead of the market. And then that's going to set a new precedent for if people want to sell. It really depends, obviously, on the property and where it is. If a buyer offered the tax assessed value to a seller last year, those sellers would laugh and say, "No way I'll sell that low amount!"
TONY: Now, when you look at a property, unless it's had recent renovation or a wicked view or something like that, the tax assessment's probably pretty close to what the house is worth. On average, tax assessments are about right now, in my opinion.
More Bank of Canada increases in 2023?PAUL: Going into 2023, if we see inflation continue, the Bank of Canada may start to raise rates again. How would that impact prices on the Sunshine Coast going forward if we see more rate hikes in the new year?
TONY: I think we will see more rate hikes in 2023. Crystal ball prediction: I don't think the Bank of Canada has a handle on inflation. I think that there are going to be more interest rate hikes. Even if there aren’t, I don't think we've seen the fallout from the existing interest rate hikes already in place.
TONY: Several times in the last six weeks, I've met with potential clients, done CMAs, talked to them about selling their property, talked to them about what they owe, what their payments are, that kind of stuff. The majority of these buyers, rather than sell at a loss, have kicked the can further down the road and decided to rent their place out, waiting out the year. These are often secondary homes that they own that are being used as recreation properties or short-term rentals. These owners are deciding to rent them out for a year and see where things are at in the future.
TONY: Now, a lot of these owners will be revisiting their decisions in May or June of this year. And when they do, I think it's going to be a more bleak outlook for them. I think you're going to see a lot of people that are currently waiting for spring thinking that spring will somehow bring a complete change in the market, even though the economy will likely be in recession at that point. These owners are going to have a rude awakening and they're going to have to sell.
TONY: This leads me to believe there’ll be a cascade of properties coming on the market in spring and I think you're going to see a lot of price drops happening in a short period of time. People seem to be taking a wait and see approach and I think that's why buyers aren't buying right now. I think they're waiting to see what happens, and no one wants to get caught buying when there could be big price drops in the not-too-distant future.
TONY: That being said, if you are looking to sell your house and buy something else, in my opinion, there’s no point in trying to wait it out or time the market because that's a real tricky thing to do. You've just got to bite the bullet and make your lateral move. But I don't think we've fully seen the fallout of the interest rate hikes that have happened, and I would be surprised if in the next few months we're not seeing a greater reduction in benchmark prices than the 2.6% per month that we've seen from May to this point.
Sell now? Or wait for spring?
PAUL: If there's a concern that prices are going to continue to fall into 2023, is there benefit to listing sooner rather than later?
TONY: I believe so, yeah. My advice is that if you have to sell, you may as well get the listing up and get it out there. In my opinion, you're better off listing it in January than you are thinking that you're going to get ahead by waiting until spring. There may be more buyers in spring, but there will also be a lot more inventory on the market for all the reasons that we have laid out. There's a lot of people hanging on to secondary places on the Sunshine Coast that are relying upon Airbnb revenue. And if that revenue source dries up, that could have a big impact on the local market, in addition to all the other stuff that's going on.
Canadian ban on foreign buyers
PAUL: A big change coming in 2023 is that the federal government is introducing a temporary foreign buyers ban. For the next two years, foreign buyers will not be allowed to buy in Canada. I think there are still some questions about exactly what that's going to look like and how foreign the buyer has to be. Will it apply to spouses or students? Depending on what the ban looks like, how big of an impact does that foreign buyer's ban have on the Sunshine Coast?
TONY: Direct impact, I'd say minimal. I specialize primarily in Gibsons and have a fairly decent chunk of the market, and I don't see a huge amount of foreign buyers. I see some, but it's not like other municipalities where you'd see a lot of them.
TONY: I think the indirect impact that we may have is that our foreign buyers (or our buyers that aren’t local to the Sunshine Coast) are primarily from the North Shore. Maybe those markets are softening because there's fewer foreign buyers buying into those areas. That may result in fewer people relocating from the North Shore to the Sunshine Coast because those buyers can still afford in those areas because of an adjustment in prices. Foreign buyers would have an indirect impact on the Sunshine Coast.
TONY: Contrary to common misconception, there aren’t a lot foreign buyers buying on the Sunshine Coast. During the summer, you might see busses of people coming around checking out Sunshine Coast and then locals might think, “Oh God, they're buying up all the property!” or, “They're flying around in helicopters and buying waterfronts!” That just doesn't happen. That's a common misconception.
TONY: I don't know if the foreign buyer ban applies to businesses or commercial properties. The Sunshine Coast DOES have some foreign buyers, whether they be from mainland China or India or someplace else, buying into the PNP program that we have on the Sunshine Coast. And as a result of that program, these foreign buyers might be looking for housing in addition to buying a business. Maybe their visa would make them exempt. I'm not sure how it’ll work.
BC's cooling-off period
PAUL: Something else happening in January of 2023 is that BC will introduce its cooling-off period. Is that too little too late? A cooling-off period might be a good idea when the market's hot, but does that have any effect now in the market that we're in?
TONY: We talked about this when the provincial government was talking about doing it. I think it's shutting the gate after the horses bolted. The interest rate increases are the thing that has the biggest impact on cooling our market. As it sits, we're not seeing the crazy multiple offers we were previously. It would've been much more impactful while multiple offers were happening and it was a big frenzy. But now we're in a buyers’/balanced market. Offers have subjects, and the average subject can now be much longer than three days. Depending on what the subject is and how it's worded, the three day cooling-off period becomes a moot point.
Updated strata RENTAL rules
TONY: The thing that will have a bigger impact for us is the removal of strata rental restrictions because that's adding some inventory to the rental pool, and that should hopefully help with people that are looking to work here, staff housing, all that stuff. I think that's good all the way around, and I think it’ll have more of an impact than foreign buyer bans and cooling-off periods that we just spoke about.
Short-term rentals in Gibsons, BC
PAUL: On the topic of rentals: short-term rentals. Will changes to how local government deal with vacation rentals have an out sized influence on the market here on the Sunshine Coast? Depending on how it’s actually enforced and implemented?
TONY: If the bylaw is enforced, yeah, it could have an impact. We've asked Sechelt Mayor John Henderson and Gibsons Mayor Silas White to come on the podcast and talk about short-term rentals. They didn't say no, so maybe that'll happen.
TONY: It would be great to have someone in the know explain how the bylaws are anticipated to pan out. It would probably quell quite a few fears that people may have. Some owners bought these properties thinking that they'd be able to rent them out, and now values have dropped and bylaws have changed. Despite that upheaval, those owners are more than happy to continue providing that accommodation and supporting our tourist-based economy.
TONY: There's a ton of Airbnbs. Many are still operating in the SCRD, in Gibsons, and in Sechelt. Will these bylaws force them to stop operating, and how will they be enforced if they don't? Will the new bylaws actually have that much of an effect? Could there be some panic selling from owners that didn’t read up on the bylaws? In my opinion, at this point, I don't think it's going to have that immediate impact that we were worried it would just because I don't know how the bylaws are going to be enforced.
Advice for Sunshine Coast buyers and sellers
PAUL: With all that in mind, what would be your advice for buyers and sellers looking at the Sunshine Coast in the first part of 2023?
TONY: I think if you're a buyer that's been sitting on the fence for a year and a half hoping for prices to drop, I'd say now's the time to put your money where your mouth is and to pull the trigger. If you're a cash buyer or a buyer that has your mortgage approval in place, you're ready to start shopping in January. It's a great time to be buying. Obviously, you're not going to buy in January and then try to flip it in March. But as long as you're buying the home to live in it or hold it or keep it as a recreation property, now's the time to go.
TONY: As far as sellers go, if you're trying to make a lateral move, it could be a good thing to do if you want to upgrade. You're selling at the current depressed price, but you're also going to be buying the next level up at the current depressed price. It's an opportunity to do that in a calm market as opposed to a super heated market where you were paying well over market value. Like we talked about at the beginning, one of the silver linings to the market balancing out is that it’s become more civilized. People are still going to buy and sell houses. I think now it's just a pause because it's so tumultuous that people are waiting to see what happens.
Importance of a local Realtor
PAUL: If you're looking to sell, how important is it to work with a Realtor that really understands what's happening in the Sunshine Coast market right now?
TONY: The homes that are selling are the ones that are priced appropriately. They're sharply priced, they're priced to get ahead of the market, and there still are buyers for those homes. But if you’re stuck on prices from July last year, or if you've been trying to sell for three or four months, the market is telling you that your expectations are a little bit off. If you're not willing to sell it for less than that what it was worth at the peak, then you're better off waiting. Maybe you’re hoping for that angel buyer to come along, but realistically, that likely won’t happen.
TONY: If you do want to sell and you’re serious about selling, you need to work with an agent that knows the local market and can give you good advice. Someone that's on top of the other listings that are available and that keeps abreast of what values on the Sunshine Coast look like right now. If you’re on the fence about who to work with, there is potential jeopardy in working with a Realtor that’s not local to the Sunshine Coast. You need a local expert that understands the Sunshine Coast market and can help you avoid either buying too high or listing too high and not selling.
CALL TONY TODAY
If you’re not already working with an agent, call me when you’re ready to buy or sell and I’ll guide you through the busy and competitive real estate market on BC’s BEAUTIFUL Sunshine Coast.
Tony Browton - TrueBlueRealty.ca
Personal Real Estate Corporation
RE/MAX City Realty (Gibsons)
Email: Click here to email Tony
Personal Real Estate Corporation
RE/MAX City Realty (Gibsons)
Email: Click here to email Tony
⚠️ DISCLAIMER: This blogpost is not intended to cause or induce breach of any existing agency agreement.