Its no secret that Surrey has some of the most outrageous real estate prices in the entire country, let alone North America. While Surrey is one of the world’s most desirable places to live, the reason why real estate has gotten so crazy has many influencing factors. To help you get an idea of why prices are so high, and how this knowledge can help you on your search for Surrey or even Surrey real estate, take a look at the reasons listed below.
Demand and Land
As we mentioned above, Surrey is a really desirable place to live, and the same goes for many of the other towns and cities in BC’s lower mainland. That has led to a high demand for living space, which is why towns like Surrey and Richmond have also seen prices rise as the demand spreads. The problem with this high demand is the fact that geographical constraints in the area means there is limited space to build residential properties, thus driving up prices in a market where there is no shortage of buyers.
With the cost of building materials and labour on a steady rise, the cost to actually build the homes in this area has risen. This expense has naturally been transferred to those people buying a new home, especially if they are looking for unique materials for custom house features such as granite counter tops. The cost of improving the infrastructure in the area also has an impact on the prices of new or rebuilt homes.
A lot of the driving force behind the rising price of Surrey real estate as well as the rest of the Surrey area is the influx of foreign wealth into the market. This has actually caused the housing market to become less associated with the local labour market, meaning the inflation of prices has been influenced by investors who earn and spend outside the local BC market. Purchasing multiple properties to flip and sell has been a big contributor to the rise in costs in otherwise affordable neighbourhoods, and most attempts to curb this type of investment have fallen short.
The trend can’t be entirely blamed on the influx of foreign wealth. There are also plenty of unscrupulous real estate professionals looking for fast money and willing to cut regulatory corners for the sake of a commission. Shady acts such as forged signatures on lease agreements have led to sales that drive up the market at the expense of other law abiding agents, buyers and people selling homes. Combine that with a lack of oversight and penalties for misconduct that lack teeth, and the artificial price inflation will go on.
This falls under the unscrupulous category of real estate practices, but the abundance of shadow flipping has made it a cause for high prices on its own. When you traditionally flip a house, you make investments in renovations and sell the upgraded property for a profit. Shadow flipping is essentially the same, except there are no renovations, and the selling price of the home is outrageously higher. This gives unscrupulous real estate investors a huge incentive for a quick cash grab, meanwhile driving up the price for a home that should never be purchased at that price. Unfortunately, the demand is high enough that the property will sell, and oversight is lax enough that the consequences for getting caught shadow flipping are negligible.
Thanks to databases like MLS, it is easier than ever to browse real estate listings without ever having to set foot in a prospective property. This is great for the average home buyer with a middle class income, but it has also made it way easier for foreign investment to take hold of the market. Foreign investors, just like you and me, don’t even have to set foot in the country to see the properties they’re interested in. Purchasing is then a simple matter of getting a representative to complete the transaction.
Whenever there is an artificial price bubble on something as abundant as real estate, there is sure to be some shady financial operations at work. Recently, it has been discovered by data analytics firms and the Canadian government that a lack of oversight in the real estate transactions in BC leaves a very high risk for being used as a transfer and holding vehicle for laundered money used for organized crime. As prices continue to be artificially propped up, and regulation remains low, the window is open for the inflation of housing prices to continue.
Low Requirements for Real Estate Industry
This boom in real estate in Surrey and all over the lower mainland has caused the amount of real estate agents to grow exponentially. Think of it as a mini gold rush, where all sorts of people looking to strike it rich are funnelling into the area. Some are qualified to handle real estate transactions properly and according to regulation, but most are prone to errors and breaking regulations in the interest of making a quick buck. This is why it is vital to research your representative before hiring them to sell your home.
Unrealistic Approach and Bias
One of the main culprits that has no direct financial impact on the real estate market in Surrey, but still represents a huge factor in high realty costs, is the current language and information being discussed around this trend. Most people have probably seen the headlines calling Surrey an ‘unaffordable city’, but these can be misleading in the interest of maintaining the high market costs. Developers and real estate associations are actually fuelling this notion that prices are never going to drop in the lower mainland. Despite the lack of credibility of this blanket statement, people are more inclined to agree with that assessment, while dismissing those who blame foreign investment and high immigration rates as xenophobic.
The population of Vancouver, Surrey and the entire lower mainland is expected to continue to rise, with a million more people expected to live here by 2041. With this fact in mind, the municipalities in the area are pushing for more residential growth, but this has caused some places, like Surrey, to overestimate the impact of this population growth and artificially expand the housing market. This is turning cities like Surrey into investment hubs for the wealthy class, rather than a planned community for local residents and members of the workforce.