High interest rates are starting to have an impact on the Tri-Cities real estate market, after a busy spring and summer.
That's the view of a Port Moody real estate agent who is watching how the Bank of Canada's near record-setting interest rate hike in July is impacting buyers.
In short, home buyers are taking a pause.
"Now many home buyers are scared again. It's like a roller coaster and people are worried," said Jordon Sutton, managing partner with Angell Hasman and Associates Tri-Cities.
The Bank of Canada raised its benchmark interest rate by 25 basis points in July, marking the first time since April 2001 that the figure hit five per cent.
Now, all eyes are watching to see if interest rates will rise again in September in further attempts to cool inflation.
Flurry over real estate assignments
Sutton says people are already feeling the pinch of seven per cent variable interest rates.
He's concerned about the impact of another rate hike on young families and others who bought during the COVID-19 pandemic when interest rates were low.
"No one would have seen that coming," said Sutton.
Now, some who bought before buildings were completed are selling to avoid having to make the full payment upon taking possession of the unit.
In some cases, investors are buying real estate assignments at prices below the original purchase price, Sutton said.
For example, a number of units in 50 Electronic Avenue have come for sale as the opening date for September looms.
"The value is there for people willing to take the risk," said Sutton, noting in some cases the new units are selling for less than 15-year-old condos in neighbouring Klahanie.
Pause in rate hikes created demand
Sutton said real estate activity was buoyant in April, May, June and July likely caused by pent-up demand over the winter and a pause in interest rate hikes.
Beginning in January, the average detached home price in Coquitlam rose every single month, starting at $1,664,600 and is now at $1,795,400.
Condo prices rose, too, with the average price increasing from $695,800 to $742,200 since February.
People with interest rates locked in for 90 days wanted to make a move, worried that the Bank of Canada would raise rates.
Instead, it held rates at 4.5 per cent from January until June, increasing the rates by 25 basis points in each of two subsequent rate hikes.
During the pause, buyers were active, said Sutton, including in the luxury real estate market, where a waterfront lot at 668 Alderside Rd. in Port Moody sold in eight days for $4.5 million.
It was the highest listing to sell in the Tri-Cities in 2023, and the 10,000 sq-ft. property attracted multiple buyers, he said.
A few weeks later, there were signs that sales were slowing; two side-by side lots at 986 Seaforth Way tell the story.
One lot sold in June for full price at $1.2 million and the second lot has yet to sell.
People pay attention to interest rates
"Now it's really quiet," said Sutton, who said it's not unusual for real estate sales to slow and pick up in the fall.
What could throw a wrench into things is another rate hike on Sept. 6.
"People really pay attention to interest rates," Sutton said.
Meanwhile, the number of properties on the market is at a 20-year low, adding further to the challenges of young families looking for homes.
"It's a different demographic — more end users and less investors unless the deal is right."
