I have five generations of family in Northeast B.C and I have lived through a few boom-bust cycles. Ride the wave, I say, there is never a dull moment. The year the farmers are going to harvest a bumper crop is the year snow arrives early – real early. The patch, as the locals call it, well, it is all or nothing.
The community is currently digging out of a tough, nothing year. We are maturing in the north with diversification helping. It is not an easy life. Business owners are constantly trying to keep up, or, when things slow down, they have a chance to catch their breath and hopefully build in new efficiencies, and focus on keeping costs down. When it’s busy, they can barely keep up and begin to fill positions with two legs and a heartbeat.
We here the north are disconnected from the remainder of the province. Back in late 2015, I was having a telephone conversation with a Lower Mainland consultant. He made the comment that he didn’t think the low price of oil would impact our region. Really? Are you kidding? Then there are those people “down there” who think we are geographically similar and close to Prince Rupert. For the record, it is a 14-hour drive from Prince Rupert to Fort St. John. This was months before Fort St. John experienced the worst sales volumes in MLS history for the 30 years I have been involved in the real estate appraisal business.
The residential housing market began to show signs of trouble in late 2015. It was local property managers that quickly realized we were in trouble. Long-term corporate tenants were cancelling leases and vacancy rates quickly began to rise. Fort St. John experienced a record year for single-family housing starts as well as multi-family units. The rapid construction was in support of the perceived boom cycle we were about to enter in support of the approved Site C dam project. Unfortunately, those housing forecasts to meet the needs of the project workforce did not anticipate the effects of low commodity pricing. Fort St. John saw 2016 as the worst year in real estate since the early 1980s. The first four months of 2016 are showing signs of increased optimism with sales volumes double over the same period last year. It will be a long while before new housing starts increase to the level previously experienced. Let’s slow it down to sustainable, measurable growth.
Fort St. John faces a challenge of fluctuating markets caused by many opposing forces, including out-of-town investors, changes in resource-based commodity pricing, fluctuating labour markets, and cost of labour. Selling rental properties to out-of-town investors has and continues to be a hot commodity with investors arriving by the planeload. This market offers a double-edge sword to the community. On one hand, out-of-town investors with deep pockets are buying up the affordable housing inventory to be utilized as rental properties. Overbuilding to support this large investor market heavily impacts stability in small communities. There must be constant forecasting as well as healthy long-term planning. This is a challenge for free enterprise. Often by the time the housing inventory has been stabilized another force is working against the reactionary investments.
Currently, the rental market has a healthy vacancy. There is an inventory of older rental apartments that offers affordable housing options supporting service industry employees. Rental rates continue to be reasonable, down about 30 per cent from what was experienced in 2014-15. The Site C dam project constructed a large work camp to house the project workforce.
The rental market is the first measure to take note on the overall health of a resource-based community. The labour market is a close second. The labour market does not calculate the lack of work for self-employed contractors. These people were drastically impacted over 2015 and 2016.
As the rental market becomes healthy, and rents are stable, we now notice the spring real estate sales volumes are recovering. Consumer optimism is returning. There is a general sense that the market has reached bottom and is once again headed upwards. High-priced inventory sales volumes are unseasonably strong, which, in the north, confirms we once again have confidence. Those investors that have been saving for a good deal on a rainy day are once again injecting money back into the market.
This is market trending 101. I have a detailed quarterly report available for deeper analysis that allows long-term trending and better eyes to read the market. When making a long-term real estate investment, let’s begin to formulate a toolbox that will allow you to ask the questions to best suit your long-term needs. This first column gives you an ability to understand market trends.
Edwina Nearhood is a life-long resident of Fort St. John. Her 30-year experience in the appraisal industry offers a unique lens on the challenges associated with the economic forces impacting real estate and the community. This column will offer insight for local residents on the impact of the boom-bust cycle in remote northern BC and the challenges local businesses and residents face in the land of the north.
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Real Estate Reality Check
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