A Historical Perspective of the Vancouver Housing Market

In the first year of the COVID-19 public health crisis – specifically April 2020 – there was speculation that the Canadian real estate market would crash, giving many young families the opportunity of a lifetime, especially in major urban centres, like Toronto and Vancouver. Indeed, home sales activity did decline by about 39 per cent in the Greater Vancouver Area (GVA) real estate market in that first month. Housing inventories tumbled by 34 per cent in this same span, while housing prices in the region remained relatively flat during the first year of the coronavirus pandemic, with buyers hesitating to order moving fans during a once-in-a-century public health calamity. At the same time, sellers were equally hesitant to open their homes for viewings. All these factors resulted in a decline in both supply and demand for housing in the Vancouver housing market . 

Of course, everything changed in the months coming out of the first wave of the pandemic. The second year of the pandemic saw a dramatic change in Vancouver.  

Residential home sales spiked 42 per cent in 2021, attributed to the Bank of Canada (BoC) slashing interest rates to nearly zero, household savings skyrocketing amid infusions of liquidity and a shutdown marketplace, and remote work arrangements due to the pandemic. Simultaneously, the listing activity could not keep pace with the demand, and prices began accelerating. The benchmark price for a residential property in Vancouver showed an increase of more than 17 per cent in December 2021 compared with December 2020. It was also nearly double the average Vancouver house just a decade ago. 

In addition, as a result of the pandemic, buyer preferences and priorities changed significantly.  

People became more interested in remote areas and were keen to choose residential properties with more square footage and better scenery, even if the distance to the major urban centre was longer. This was because many people could work remotely during the lockdowns and run businesses from their homes. Remember, there was a time before the pandemic when people were leaving the suburbs in this region and were interested in living in the urban core, but this event possessed the opposite effect, and people wanted to move to the suburbs instead and away from hyper-dense locations as much as possible. 

Years later, are things expected to change much now that conditions have stabilized and returned to normal? 

CMHC and the BoC

According to the Canada Mortgage and Housing Corporation (CMHC), average home prices in Canada and main cities like Vancouver are unlikely to revert to pre-pandemic levels, at least in 2023. 

The federal housing agency has predicted that home prices and sales will continue to see a decline in 2023. The primary factors driving this lack of interest in the housing market in Vancouver include higher interest rates by the Bank of Canada (BoC), economic uncertainty, high levels of household debt, and rampant price inflation. Affordability could improve in 2024, provided housing supply increases proportionately to demand, but a chorus of market analysts are skeptical at this point. 

While the central bank has raised the benchmark interest rate to five per cent since the spring of 2021, the institution recently kept it on hold following two consecutive rate hikes. By nearing the peak of the tightening cycle, economists argue that policymakers extended a modicum of relief to the Canadian real estate market, including Vancouver. Moreover, as was experienced this past spring, leaving rates unchanged could spur homebuying activity. 

That said, due to the reacceleration in inflation, it is still not completely clear if interest rate hikes are or are not off the table as far as the Bank of Canada is concerned. Therefore, buyers and sellers are both staying vigilant as people in Vancouver continue to face the challenges of inflation, economic uncertainty, high borrowing costs, and surging debt levels. However, if this is the end of the interest rate hiking cycle, the real estate market could see some positive change and make mortgages slightly more affordable for the typical borrower. 

Affordability Challenges in the Vancouver Housing Market 

Overall, the post-pandemic period is still unstable for Vancouver’s housing market. Buyers are still facing the problem of affordability along with low inventory. Average prices in Greater Vancouver have increased by an annualized rate of nearly eight percent, and the benchmark price is exhibiting an increase of close to 30 per cent over the past three years. This is true for all types of properties, whether detached residential properties or condominium units. 

In the end, the housing market’s stability is highly dependent on the Bank of Canada. Suffice it to say; it will be more of a wait-and-watch situation for most buyers and sellers in this corner of the Canadian real estate market.