The recent half-point interest rate cut by the Bank of Canada may help boost homebuilding and sales in Langley and across the region, according to the vice-president of a large local developer.
Derek Fenton, vice-president at Zenterra Developments, said that it will provide a little help to developers, who will be borrowing at lower rates for their projects.
Higher interest rates did cause some slowdowns in the industry, with some developers holding back on projects over the past couple of years, Fenton said. Developers typically have to borrow money to buy land and finance construction.
"It does put more pressure on developers," he said.
But higher costs for developers were coming from a variety of fronts, not just interest rates.
"We saw the cost of delivery go through the roof," Fenton said.
Over the past few years, municipal and Metro Vancouver development fees, such as development cost charges and community amenity charges, have risen sharply.
The B.C. Building Code has also grown more complex with the BC Energy Step Code, which mandates new buildings be more energy efficient.
While the interest rate cuts may help builders directly with lower costs to borrow for their projects, the bigger impact will be on whether it can drive demand from home buyers.
To get a project approved for financing from a bank or other lender, builders often need to pre-sell a significant percentage of units in a large development, especially in condo complexes.
For much of the last year, home sales have been sluggish, as many people were priced out of the market by a combination of high interest rates and the wild price hikes that hit in mid-2020 during the COVID-19 pandemic.
Fenton is hopeful that the interest rate cuts over the last year, and further cuts expected in December and into early 2025, will help make it possible for more people to buy homes.
Last fall, mortgage rates were above six per cent, and with the stress test, people had to qualify for an interest rate north of eight per cent, Fenton said.
Now the lowest mortgage rate is closer to four per cent, with a stress tested rate of around six per cent.
That makes homes more affordable for people, he said.
There are also always people who need to buy a first home or move into a larger one, because of marriages, having children, or moving.
"Life still happens," Fenton said.
As far as the Langley area, it will continue to boom, partly because of all the infrastructure improvements over the past decade and in the near future – from widening Highway One and replacing the Port Mann Bridge to the SkyTrain extension.
"You clearly see this is where the growth is going to be," said Fenton.
The difference right now between the Tri-Cities are and Langley is about 15 mintues of driving and $150,000 in lower housing costs, he said.
