Is relief coming to homebuyers in the Metro Vancouver real estate market?
After about a year of strengthening demand and shrinking supplies, one of Canada’s largest housing markets is beginning to see the easing of the meteoric price growth that has been the norm since the first wave of the coronavirus pandemic. But is this a temporary blip on the radar, or will there be some downward pressure in sales activity and home valuations?
With demand projected to remain strong, an injection of inventories is becoming more common as of late, especially as developers attempt to take advantage of prices trending near all-time highs. Plus, homeowners might be thinking the writing is on the wall and that now would be the time to strike while the iron is hot and sell at these sky-high prices.
Whatever the case, for young families attempting to achieve the Canadian dream, this is a positive trend after being forced to sit on the sidelines for too long.
What are the numbers telling us? Let’s scratch beneath the surface and see what is happening across this urban west coast market.
Will More Supply Ease Prices in the Metro Vancouver Real Estate Market?
According to the Real Estate Board of Greater Vancouver (REBGV), residential home sales surged 187.4 per cent year-over-year in May to 1,485 transactions. Residential sales were also 27.7 per cent above the decade sales average for the month of May. On a per-month basis, sales activity tumbled 13 per cent from April.
Vancouver real estate prices have slowed down, too. The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver rose just 1.5 per cent month-over-month in May to $1,172,800.
Detached, attached, and apartment homes have seen their month-over-month prices climb a little more than one per cent.
So, why are prices beginning to ease, particularly during the historically busy spring buying season?
The listings could provide some insight. New residential listings for detached, attached, and apartment properties spiked at an annualised rate of 93.4 per cent to 7,125 in May. Active listings have jumped 10.5 per cent from the same time a year ago.
Housing starts have been on the rise, with data from the Canada Mortgage and Housing Corporation (CMHC) showing that housing starts increased 2,558, bringing the year-to-date total to more than 11,500. However, completions are down by nearly from last year to 1,256.
REBGV economist Keith Stewart might have summarised the current state of the Vancouver real estate market in the best possible way, referring to it simply as less intense.
“While home sale and listing activity remained above our long-term averages in May, conditions moved back from the record-setting pace experienced throughout Metro Vancouver in March and April of this year. With a little less intensity in the market today than we saw earlier in the spring, home sellers need to ensure they’re working with their REALTOR® to price their homes based on current market conditions,” he noted in a news release.
“With sales easing down from record peaks, a revised mortgage stress test that reduces the maximum borrowing amounts by approximately 4.5 per cent, and the average five-year fixed mortgage rates climbing back over two per cent since the beginning of 2021, we’ll pay close attention to these factors leading into the summer to understand what affect they’ll have on the current market cycle.”
With a new mortgage stress test, an inevitable rate hike next year, and potential exhaustion in pent-up demand in the post-pandemic economy, will this easing be enough for first-time homebuyers to afford a comfortable three-bedroom semi-detached home in the core of Vancouver?
The Reality of the Vancouver Real Estate Market
After more than a year of record-low interest rates, pent-up savings, and evolving consumer trends, could the Vancouver housing market, as well as the broader Canadian real estate market, finally stabilise? While price growth is slowing down from its fierce acceleration, the benchmark for a detached home in Vancouver stands at around $1.75 million. Even a condominium unit has topped the national average for a home, selling for nearly $730,000.
For millennials trying to emulate what their parents did at their age, it can be challenging, whether it is coming up with a down payment or being accepted for a mortgage. This has forced many young families to leave the downtown core and venture within the Greater Vancouver Area (GVA) and other southern British Columbia suburban and rural markets.
Unsurprisingly, a new Angus Reid survey revealed that more than one-quarter (26 per cent) of Vancouver residents say they would like to buy, but they cannot afford a home.
“About half of them say, ‘Look, I would love to own or buy a place, but I just cannot access the market,’” said Shachi Kurl, president of the Angus Reid Institute, in an interview with CTV News. “And then you have the other half who are saying things like … I’ve either voted myself off the real estate island and I have no intention or interest in buying or I don’t think I’ll ever be able to afford to buy a home in my lifetime.”
That said, by surrounding yourself with a trusted and experienced REALTOR®, a treasure trove of information, and a pre-approved mortgage, you can be confident that you will purchase a property within your budget and that is tailored to your family’s needs. Is this a market about waiting, watching, and seizing the right opportunity? Perhaps, do your best to be prepared at any time.