Fraser Valley Home Prices Recovering Towards Peak Pricing

by Mike Harrison

HPI Benchmark Prices peaked in Q2 of 2022 before taking a dramatic double-digit dive as the Bank of Canada drove interest rates up at a pace not seen in ages. Commonly attributed to the region’s chronically low housing supply, prices turned around in January 2023 and have been on the rise ever since, despite additional interest rate increases continuing to drive up mortgage costs and erode purchasing power. Those 7 months of increases have Benchmark Prices of some housing types in some neighbourhoods approaching historical peak prices. Others still have a way to go.

The map below shows the percent delta between July’s HPI Benchmark Price and peak pricing from early 2022. A few things stand out:

• Overall, Willoughby and South Surrey are recovering the fastest
• Condo prices are nearing historical peak pricing in Clayton and South Surrey
• South Surrey single-family detached is outperforming the Fraser Valley by a landslide at only 7% below peak pricing

Data source: MLS Home Price Index (HPI), CREA and Fraser Valley Real Estate Board

The chart below isolates the single-family detached segment stacking the July 2023 Benchmark Prices (blue bars) against the 2022 peak prices (green bars) for each of the same neighbourhoods. In this form, trends like South Surrey’s outperformance or Mission's underperformance become even more apparent.

Data source: MLS Home Price Index (HPI), CREA and Fraser Valley Real Estate Board 

What does this mean for the residential development land market in the Fraser Valley?

Historically, when home prices rise, we expect to see development land values rise as well. While we did see land values recovering slowly after last year’s 20-30% correction, they have plateaued, coming up well short of peak values. Home selling prices did rise but construction and development costs rose at an even greater velocity, wiping out nearly all the value that could have been added to the land.

With that said, seven months of month-over-month increases in Benchmark Prices are confirming that developers' faith in the Fraser Valley market’s resilience is not unwarranted. As a result, demand remains steady for development land, particularly in the core markets reporting the strongest recoveries.