Real Estate in British Columbia, Canada

This section provides a detailed analysis of the real estate market in British Columbia (B.C), Canada. This incorporates an overview and review of the existing data concerning the real estate market in the state. The objectives are achieved through the application of various marketing theories to establish the actual state of the industry. The report focuses on several methods which include PESTEL analysis, Porter’s Five Forces, SWOT analysis, Marketing Mix, Balanced Score Card and Ansoff Matrix. The primary aim of this report is to establish the viability of the market based on its current situation by highlighting its strengths, faults, and potentials.

PESTEL Analysis

Political Factors

Political factors serve a significant responsibility in the determination of the forces that generally affect real estate investment as well as profitability in BC. The real estate industry has always been so strategic, but it has also evolved in the recent into a well-organized sector. The Canadian government has developed a real estate regulatory intervention authority for the coordination of regulatory efforts at the federal and state levels respectively. Real estate investments have increased in the recent as the industry is ranked among the top leading industries regarding economic influence. The regulation is aimed at collecting taxes from the industry while creating a balance with the country’s economic vision and directions. The political state in BC is not only stable but is one that generally supports investments from local and foreign corporations (Wisemean, 2011). With the presence of favorable policy and the active government participation in supporting investment, the industry has achieved remarkable growth.

Economic Factors

Technology development and modernization have given rise to intense construction in the urban and rural areas. BC is characterized by a state financial state. Due to the stability of the economy, the income rates have grown significantly in the last decade. There is a notable level of increase for middle-class individuals requiring more modernized housing. Thus, it is the rising income earning as well as the rampant urbanization that is responsible for the present real estate success. In fact, it is accounted that in BC real estate account for more than 10 percent of the state’s annual revenue is one of the industries with the fastest development rate (Wisemean, 2011). However, the increasing inflation rates within the sector are gradually affecting the prices which have led to a decreased growth rate between 2010 and 2015. Besides, the stability of the economy additionally facilitates easy financing options which in turn encourages more investments.

Social Factors

Canada is highly reputed for its possession of educated and well-skilled personnel. The aspect is reflected in BC. The diversity level is also high as the aspect that has been fueled by globalization the reason behind the rising demand for modern housing and real estate services. BC does not expect any scarcity of the expert workforce soon based on the increased populace inflow. BC is guided by the individualistic culture which mainly emphasizes on competition and prosperity. From education to the business sectors individuals are governed by the need to prosper since the culture is not restrictive. The government has reserved more funds for rural housing as part of social stabilization (Gill & Williams, 2011).

Technological Factors

Technology is responsible for the increased disruption that is taking place in various industries and the real estate one is not an exception. Real estate is currently more rampant in the urbanized setting but also slowly getting into other environments. In catering for the modern technological needs several technologies such as mold gathering and cement blowing machines are being utilized for efficiency, speedy construction, quality as well cost saving. Also, technology is being used in the industry as a strategic alternative to the development of competitive advantages (Blazek, 2013). In that, the use of electronic platforms in keeping records and information has been useful in tracking stock and maintaining constant communication with suppliers to avoid delays. Also, the success of the industry’s marketing and awareness incentives has been promoted by technology which helps in attracting consumers.

Environmental Factors

The success and benefits of the real estate industry in BC is being enjoyed by many. However, it is worth noting that environmental degradation accompanies the progress by cutting trees, hills excavation, building materials exploitation such as such leading to erosion and agricultural decrease (Marchak, 2011). Thus, the government is focusing on the general minimization of such effects by encouraging the proper use of resources and guarding natural ones such as trees and agriculture which play a critical role in cleaning the air and feeding people respectively St-(Hilaire, Ragan, & Leonard, 2007). The aspect possesses a threat to the industry since the constructions might be halted in the future.

Legal Factors

Every building necessitates registration and approval from the agencies. The process is always an extensive one since it requires clearance from the landowners and assessment from the government to establish the real practicality of such constructions. The companies must adhere to the set laws and practices. Also, the taxation rate has been rising in the recent which affects investment and the profitability of the involved companies. Such factors are the primary determinant of the move that the industry is supposed to utilize.

Porter’s Five Forces

The threat of New Entrants

The actual capital and resources that are needed in setting up a real estate firm are unusually high given that the inventories have to be organized and prepared by the construction developers before beginning. Also, in the industry there is no advance pays from the consumers thus the firm is supposed to fund everything. In this context, new firms in the industry usually experience intense difficulties in their attempt to grab projects particularly the large one since track records are also used in the assessment. In this context, it is only the well-established firms with more resources and a desirable reputation that can take such initiatives in general. In addition, based on the last financial crisis BC is still in the recovery process, and the rise of the real estate constructing and developing firms in the market has further lowered the profitability of the industry (Wisemean, 2011). The industry is mainly focused on the reduction of cost so that their profitability can rise in return. However, the cost of living has affected even the prices of materials thus necessitating the firms to focus on outsourcing most of the inventory which has played a part in cost reduction (Ebner, 2018). Also, the companies also plan on reducing the operating prices about their management offices as well as minimizing the scope of operating which is associated with extraordinary operating expenses. Thus, this is a form of a challenge and impossibility for the new firms as well as the established ones. However, new firms are the ones that face the most difficulties which then implies that entrant threat is minimal.

Bargaining Power of Buyers

The products in the industry such as the construction spaces are average. The switching expenses for the buyers within this industry is particularly very utmost. In that, the consumers in the industry are mainly involved in settling for the consumers with the best record such as the brand image. In this context, since those that offer the least prices are not very skilled or have no favorable reputation in construction the buyers bargaining authority is minimal. Property rates went down during the last financial crisis which created affordability for the buyers and gave then bargaining power an aspect that has changed in the course of the previous few years. Most individuals in the state are not able to afford these properties even though the development companies are unwilling to lower them considering that their operation expense is high and thus the move would lead to losses which will push most of them out of the industry (Hilaire, Ragan, & Leonard, 2007). As the industry is becoming very competitive, the sellers are attempting to entice the buyers through the provision of discounted deals thus the buyer's power is average.

Bargaining Power of Suppliers

In the market that is mainly dominated by well-established company’s supplier's bargaining authority is low. There is minimal to zero switching expense for the companies while acquiring raw materials needed for the development such as cement, paint and so on. Forward integration, therefore, presents minimal threats which offer the involved companies with better switching opportunities. In this context, the suppliers have less authority in influencing the responses of the firms (Mitham, 2017).

Threat of Substitutes

In the real-estate sector, there is no substitute for development and construction since the housing sector depends on it ranging from personal to commercial buildings. With no alternatives, this generally implies that there is no threat.

Intensity of Rivalry

Competition in the industry is intense due to a large number of established and new companies that are currently in operation. All these companies are providing the same products and services which are not differentiable unless several advancements in designs and materials are used which in turn makes the operating expenses higher. With the high number of competitors, profitability has decreased considerably in addition to the current economic state. Thus, it is only the firms that hold top funds and resources reserves that are likely to survive in the instance that this situation is continuous. In this case, it is rather apparent that the rivalry is intense with every company owning a piece in the market that is not very profitable as most would anticipate.

SWOT Analysis

Strengths

The real estate industry in BC is associated with the highest growth rate when compared to other companies. The booming of the industry is mainly influenced by technological growth, globalization which has facilitated the increased inflow of people and modernization. The use of technology, a positive reputation and resources are leading industry’s strength. In that, the industry is characterized by adequate resources in general that sustains its projects over time. The investment that is required in the sector is high, and it is only dominated by the firms that are well equipped regarding funds and resources ranging from the skilled workforce, reliable supplies, and effective management. Technology growth has provided the industry with good infrastructure that in turn supports the development of the industry in general (Blazek, 2013). With the ongoing evolutions, the industry can utilize such strengths in building a more profitable enterprise. Also, the ability to adapt to market and economic changes is an additional strength of the industry. The consistency of the industry well illustrates the aspect in the last few years where despite the financial crisis the sector has not withheld its operations. With the ability to mitigate changes then the productivity of the industry is not affected which is essential in preserving its relevance and profitability.

Weaknesses

Even though the real estate industry represents the fastest growing and important industry today, it is facing some challenges that threaten its wellness and growth. First, the focus of the developers is too narrow as they only focus on housing construction and development. In this, context the market is thin, and the situation even becomes worse due to the presence of a high competitors number in general (Proctor, 2016). The industry needs to be broad and target another different project that will seek to transform the state, in general, leading to developments. In addition, there is low awareness of the value of this industry to the target consumers. Due to the intensifying demand for real estate services the operating companies are driven by the assumption that the sector is well known in the market. However, the norm is inaccurate given that most individuals tend to distance themselves from the services on the ground that the products are expensive and they would not afford. Thus, it is clear that the industry has not invested adequately in creating awareness as well as familiarity with the real estate value and the benefits that the consumers are likely to achieve. Resources scarcity also represent a significant weakness of the industry given that most of the firms are pushed out of business due to the lack of adequate financing.

Opportunities

The ability to diversify into related fields is a significant opportunity. In that, the involved firms have the opportunity to expand into other different areas and explore them to acquire a substantial share. The market in BC is a developing one which means that it has not been exploited fully and it has some viable opportunities that will strategically position the industry. In addition, technology offers a possible chance of the industry’s development in general. Amidst the growing techniques that are likely to be used in the quest for increasing the productivity rate (Proctor, 2016). In that, the utilization of technology offers individuals the opportunity to identify viable markets and new trends that will, in turn, result in development (Blazek, 2013). In addition, these are essential in improving the marketing abilities of the industry in general. In addition, product development is an additional opportunity where the companies are needed to focus on the use of innovation to come up with innovated and well-developed products that will generally appeal to the consumers and meet the modernization needs. In other words, this is a form of differentiation of the product that will enable the industry to develop a strategic and sustainable competitive edge.

Threats

Competition is one of the leading danger towards the development of the real estate sector at the moment. The industry is saturated by companies that incorporate new and established firms. Given that BC does not offer an extensive market when compared to other areas the domination of these companies has resulted in reduced profitability as well as market share for those that are involved. The low market share, therefore, means that the industry might not be able to attain any substantial growth in the recent which has thus resulted in the loss of revenue. In addition, the low level of regulation is a significant threat to the industry given that it is accountable for financial damages as well as the loss of professionalism in doing business. There is lack some standardized protocols in the industry and as the market is expanding these threats the future wellness of the sector which might lead to productivity loss (Proctor, 2016). The economic crisis also presents risks to the industry since when the financial gains are not in balanced state individuals tend to prioritize on other things rather than housing. With the increasing cost, the consumers might neglect such needs due to the necessity to save more and invest in businesses. In that, the market might grow into a price-sensitive sector thus forcing the companies to lower their prices. In addition, the entry of some established or accepted brands in the market is likely to lead to increased switching where the customers will be seeking for their services. Such companies have the potential or eroding the industry have they own not only more resources but also the general ability to be innovative which will lure the customers to their side.

Marketing Mix

The real estate industry in BC is more organized than before. The target consumers hold differentiated need thus unique strategies are necessary for success in the sector. Thus with a compelling marketing mix, the industry’s objectives must be achieved

Price

It is essential for constructions or housing developments to be priced appropriately. In the market, today buyers have been subjected to extensive options, and if the rates are unfavorable, this means that the consumers will be lost. Due to the moderate buyers bargaining authority and the lack of substitutes somewhat high prices guide the industry. The switching cost is high, and this forces the customers to acquire the rates based on the firm’s reputation. The norm might appear as favorable, but it is likely to discourage the consumers in the near future by developing prices sensitivity which will, in turn, encourage the domination of other players.

Product

The product in this context refers to the real estate services. While the success of the firms in the industry mainly relies on the ability to cater to the most consumers, the sector should be ready to create a balance. The industry is primarily involved in the provision is retail and collective services depending on the size of the facilities that are to be provided. The convenience of the services and quality has been useful in retaining a significant market share for the consumers in general.

Promotion

The use of useful marketing options has driven the success of the real estate sector in BC. In that, the industry has been focusing on organized housing as well as promotions on online platforms, advertising, and discounted sales. Online marketing is the preferred marketing option on the ground that it is cost effective and can reach more consumers within the shortest time. Online websites and social media have been an excellent platform where the consumers can directly interact with their preferred firms and inquire about their services.

Placement

In attracting the highest number of consumers to the real estate sector, the industry has been focusing on the right placement of its advertisements and services. In that, most companies have selected some of the most useful sites that hold more users to post their publications such as Facebook. Besides the agencies are set within short distances where the customers are located which allows them to get the services and connect with the companies while reviewing their operations.

Ansoff Matrix Analysis

Market Penetration

Market penetration generally entails the trail to increasing market share in a given market either by increased sales or attracting a new set of customers (Wippel, 2013). The real estate industry is dominated by a single product that has no substitute thus the involved firms are involved in the competition to ensure that they get a substantial share. The real estate competition is intense which has forced companies to forge approaches to address the issues for revenue maximization. In penetrating in the market, the involved firms mainly rely on cost differentiation as the entry approach. However, since cost leadership is likely to lead t losses in economic crisis period diversification is an alternative as it requires similar resources and guides to saving.

Market Development

The aspect of market development involves establishing a new set of buyers for the products (Wippel, 2013). In that, the industry has been targeting middle and upper-class individuals since they have adequate income that enables them to afford the services. However, through market development, the sector should develop customized products targeting the low-income individuals. It is estimated that this populace comprises about 40 percent of the BC populace which will provide a viable market.

Product Development

Product development to the situation where a company that is well established in the market in terms of market share and resources introduces fresh products (Wippel, 2013). The product should be customer centered by adding more value to outdo the contenders. In that, since it is not possible to differentiate products in real estate, it is only through innovation that the companies can upgrade their competitiveness. In that, this is achieved through improved designs and providing other services and discounts.

Diversification

The approach incorporates the development of a new set of products that generally offers complementation to the existing products. As consumers are becoming more sensitive with regard to technology, there is a necessity to innovate the product to fulfill their demands (Blazek, 2013). Even though such products demand higher prices, there is a target set for such products.

Balanced Scorecard

General Objectives

The real estate industry in BC aims at being the most stable industry in dealing with constructions and developments. To achieve the objective it intends to maximize its revenue by owning the most comprehensive market share in general. Thus, through the adoption of technological advances, this will be useful in attracting a new set of consumers. However, with the consistent changes in the market, the adaptability is proving to be a challenge as competition has also intensified.

Financial Objectives

The industry through the existing companies aims at achieving sustainability in terms of financial stability through research and development. The approach will bring about sustainability and standardization in the market. It is anticipated that with an economic crisis the sales will reduce by about 20 percent in the next two years (Tencer, 2018). Thus the industry is focused on stabilizing it's earning in standardizing everything that is likely to be lost.

Consumer Knowledge Perspective

The consumers of the real estate sector are diverse in terms of income and preferences. Thus, the industry is seeking to focus more on innovation which will, in turn, increase its strategic success. The consumer-focused operation is essential for inducing a large market share which will be used for competitive positioning.

Learning Perspectives

Learning perspective is an essential aspect that ensured that all the goals are satisfied. The real estate suffers from the lack of a large skilled workforce with most companies relying on manual labor from cheap laborers. There is a necessity to provide adequate training to the staffs which will ensure that they offer the best towards the projects. The approach leads to quality and effectiveness in general.

Recommendations

It is without a doubt that the real estate industry is one of the well-established sectors across the globe an aspect that is well reflected in BC. It is apparent that the success of the sector is mainly linked to technological advancement, globalization, modernization, political, economic stability and income increase. It is proposed that for the industry to retain its competitiveness and success in the long term, then it should thus focus on the use of technology. Technology has proven its potential, and ability to catalyze development across different industries and the real estate has not been exempted. In this context, the use of technology is useful in increasing efficiency in general. In that technology can best be utilized in reporting as well as keeping records. Technology provides the opportunities for individuals to advance and acquire new skills that seek to guard the profitability of the company. It is through the use of technology that innovation can be embraced leading to efficiency and productivity.

In addition, there is a need for the industry to invest in research and development. R&D has proven to be a practical approach for the stability of different sectors across the globe. Thus the industry should spend as the means of establishing the needs of the consumers as well as seeking to develop different strategies to meet the demands. The market is generally associated with general changes that affect the adaptability of the involved firms. Due to modernization and technology advancement, the needs of the consumers are changing so often that the companies are required to keep up with the changes. With the need for more resources, the ability of any firm to survive in the market is generally determined by its ability to cope with changes. In that, a company can never be successful in the market if it is unable to meet the needs of the consumers. The satisfaction of the consumers leads to the development of a positive reputation which consequently attracts a new set of customers while retaining the existing ones. Therefore R&D will be useful in enabling the company to provide more quality services to the customers. In addition, this will increase the adaptability of the company.

Social media marketing has proven to be one of the most effective strategies for promoting operations in the modern society. Due to the development of technology and internet access millions of people are currently using social media. Thus, this is a potential platform where companies can market their businesses (Blazek, 2013). It is worth noting that unlike the use of online advertisement marketing is cheap and support the aim of the industry to minimize the operating expenses. In this context, it is rather evident that online marketing will allow the companies to reach more consumers within the shortest time. In addition, the companies have the opportunities to interact with their consumers at ease which will enhance customer relationship. The platforms are beneficial since the companies will get to learn about the needs of the customers through their feedbacks. It is also through the responses that the companies can focus on addressing their weaknesses.

More so, awareness and familiarity campaigns interventions are also recommended. Based on the market analysis above, it was determined that most of the consumers in the market are not aware of the value that the real estate industry offers. Most of the consumers hold the assumption that the firms price their products highly which discourages them from buying. Thus through the programs, such assumptions will be eliminated which will enable the consumers to seek to the development services. The industry should diversify its product by targeting a new set of consumers. In that, currently, the industry only focuses on the upper and middle-class individuals. Thus by customizing the services, the low-income earners will join the market as they provide the greatest share as per the current. The combination of this strategies will competitively position the industry thus increasing its earning.

The Prospects for the Future Real Estate Market

Prospects for the real estate industry in BC Canada is very captivating. The future of the industry is excellent given that the highest growth characterizes the industry. Due to the stability of the economy, more and more individuals have begun to recognize the worth of the sector. Modernization is consistently allowing individuals to enjoy the significant benefits that result from real estate services (King, 2018). Thus as technology continues to advance, it has been established that the future of the real estate sector will be more promising. In that, the involved firms will be able to manage the movement of stock, maintain constant communication with the suppliers and consumers as products enhancement. In general, it is rather evident that technology leads to the advancement of the industry (Mitham, 2017). As the consumers are getting adequate awareness of the market in general then they can get to understand the operation of the market then the market will continue to expand.

The market has not be exploited fully, and the future will be more profitable as the companies get to understand the aspects of the thriving market. It is without a doubt that as the market continues to expand so will other investors get into the market thus intensifying the competition on the market. The higher the level of competition the lower the revenue that the firms will be getting from the market (King, 2018). However, a balance will be created on the ground that the companies will be able to expand and explore other markets that have more potential. Also, with the rising cost of the acquisition of resources, it is rather clear that new companies will not survive in the market which will lower the competition rate. The market is only more promising for the companies with adequate sources and funds to support their operations. With the investment in research and development, the companies will be developing.

BC represents one of the most preferred locations for residential and business focus in Canada today. This is how the region has managed to become the favorite investment destination for most individuals (Laanela, 2016). As the population in this region continues to increase so is the demand for modernized housing. The real estate sector will continue to harvest more resources in this market. In addition, the economic stability of the region is a source of hope for the future of the industry. As individuals continue to achieve financial balance so makes their demand for suitable housing. Due to the political and economic stability, it is anticipated that the industry is likely to produce a growth rate of about 20 percent in the next three years. The growth offers more opportunities for the operating companies in general.

 

 

 

 

 

 

 

 

 

 

References

 

Blazek, M. (2013). The Impact of Technology on real estate. Greater Chattanooga Association of Realtors. Retrieved from: http://www.gcar.net/news/entry/the-impact-of-technology-on-real-estate

Ebner, D. (2018). B.C.'s new measures aim to temper rising real estate prices. The globe and Mail Inc. Retrieved from: https://www.theglobeandmail.com/news/british-columbia/bc-budget-treading-new-ground-in-hopes-of-cooling-housing-prices/article38045867/

Gill, A. M., & Williams, P. W. (2011). Rethinking resort growth: Understanding evolving governance strategies in Whistler, British Columbia. Journal of Sustainable Tourism, 19(4-5), 629-648.

King, R. (2018). Canadian real estate market outlook 2018. Retrieved From: http://www.moneysense.ca/spend/real-estate/canadian-real-estate-market-outlook-2018/

Laanela, M. (2016). Is Vancouver's real estate market really in free fall? CBS News. Retrieved from: http://www.cbc.ca/news/canada/british-columbia/vancouver-real-estate-1.3746472

Marchak, P. (2011). Green Gold: The Forest Industry in British Columbia. UBC Press.

Mitham, P. (2017). Tight real estate supply discouraging upward market movement. BIV. Retrieved from: https://biv.com/article/2017/08/tight-real-estate-supply-discouraging-upward-marke

Proctor, J. (2016). Is it time for a crackdown on B.C.'s real estate industry? CBC News. Retrieved From: http://www.cbc.ca/news/canada/british-columbia/real-estate-final-report-vancouver-1.3646493

St-Hilaire, F., Ragan, C. T. S., Leonard, J., & Institute for Research on Public Policy. (2007). A Canadian priorities agenda: Policy choices to improve economic and social well-being. Montreal: Institute for Research on Public Policy = l'Institut de recherche en politiques publiques.

Tencer, D. (2018). Canadian Housing Forecast Revised Down After Sales Hit 5-Year Low. Huffington Post. Retrieved from: https://www.huffingtonpost.ca/2018/03/15/canada-housing-forecast-crea_a_23386637/

Wippel, S. (2013). Regionalizing Oman: Political, economic and social dynamics. Dordrecht: Springer Science+Business Media.

Wisemean, N. (2011). In Search of Canadian Political Culture. UBC Press.