Too many homes, not enough buyers


In the May episode, I confidently predicted that interest rates wouldn’t drop until at least the fall. However, just a few days into June, rates unexpectedly went down.

This move by the Bank of Canada took me by surprise. The prevailing theory is that the rate drop is intended to ease the burden on the large number of Canadians renewing their mortgages this year.

Why rates went down



With about 75% of Canadian mortgages up for renewal in the next 18 months, many homeowners face the possibility of their mortgage payments increasing by 40-50%. Considering that about 20% of Canadian mortgages normally renew each year, it’s easy to see why 75% of mortgages renewing by the end of 2025 is a cause for concern for lenders and the Bank of Canada.

A lot of sellers and Realtors saw the 0.25% rate drop and thought, "Yes! Prices are finally going to take off!” But we haven't really noticed much of an uptick on the Sunshine Coast. I think buyers need to see bigger rate drops (or a series of smaller drops) before they’re ready and able to start buying again.

The Sunshine Coast has a lot more inventory – about double the usual amount for this time of year – so despite the rate drop, the market remains slow. My team and I are operating at about 50% of our normal production. Typically, we might handle around 120 transactions in a busy year and about 80 in an average year. So far this year, we’ve completed about 30 transactions, indicating a notable slowdown.

The Ferry Factor



The dynamics of the Sunshine Coast real estate market have always been influenced heavily by our geographic location and infrastructural quirks. Pre-COVID, the ferry was a significant barrier, often seen as a negative aspect of living here. Ongoing challenges with BC Ferries, especially during the summer, adds considerable travel time to any trip to or from Vancouver. Visitors (grudgingly) accept that they may need to wait for hours for a ferry but long wait times are non-starters for regular commuters. As such, buyers that wanted to work in Vancouver and live on the Sunshine Coast saw the ferry as a major disadvantage.

COVID changed Everything



COVID-19, however, turned this disadvantage into a benefit. Buyers saw the ferry as a barrier to disease, making the Sunshine Coast an attractive place to move during the pandemic. Coupled with the roll-out of Telus’s fibre trial, we saw a surge of buyers who typically wouldn’t have considered moving here due to their work commitments in the city. The sudden widespread ability to work remotely led to a spike in Sunshine Coast property prices.

The tide is changing

There are new restrictions on short-term rentals, the ferry is once again seen as a negative, and our primary buyer demographic has reverted to being mostly retirees. The Sunshine Coast real estate market has a seven-year cycle, during which time we see property values fluctuate.

Given the current high inventory and low sales, we’re still likely to see a significant drop in median house prices by the end of the year.

Navigating Our Soft Market

For sellers, our current soft market means pricing aggressively and being responsive to feedback. Typically, the first two to three weeks after listing are crucial. This is when we see the most activity and get valuable feedback from would-be buyers. Motivated sellers who adjust their prices based on this feedback are more likely to make a sale. On the flip side, overpricing in a softening market often results in having to make even more significant price reductions later or not selling at all.

Airbnb owners especially susceptible 


Because all levels of government are cracking down on short-term rentals, properties previously listed on Airbnb and VRBO are now entering the long-term rental market. This new supply of rental housing means long-term vacancy rates are climbing, monthly rents are falling, and the pressure on tenants is easing. Investors that are exiting the short-term rental market need to focus on selling in a timely manner than squeezing every last dollar out of the transaction. For investors that want to enter the long-term rental market, there are potential opportunities but you need to look for properties that provide a favourable cap rate.

A local expert is your best bet

Given the complexities of the current market, it’s crucial to work with a local real estate agent who knows the area well. Whether you’re on the Sunshine Coast or anywhere else, it’s import to use a real estate agent that's an expert on the area in which you’re buying or selling. You may have a niece or a nephew that’s a Realtor in Tsawwassen or Delta or Maple Ridge, but they're not necessarily going to be your best asset when transacting in a remote area where they don’t have much experience. Whether you’re buying or selling, having an expert Realtor who understands the local market is invaluable.

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 - TeamTrueBlue.ca
Personal Real Estate Corporation
RE/MAX City Realty (Gibsons)
Mobile: 604-418-2695
Email: Click here to email Tony

⚠️ DISCLAIMER: This blogpost is not intended to cause or induce breach of any existing agency agreement.
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