Another month, another substantial boost for the Vancouver housing market.
It has been about a year since Canada reported its first case of the coronavirus, leading to a pandemic that decimated the national economy and overwhelmed the nation’s health care system. But while the road to recovery will be a long journey, one industry has appeared to be immune from the public health crisis: the Canadian real estate market.
From Vancouver to Halifax, from urban centres to rural communities, the country’s housing market continues to weather the economic storm clouds. Demand is going through the roof, supplies are failing to catch up, borrowing costs have never been lower, and consumer behaviours are evolving and adapting to the so-called new normal. This is a hot time for the Canadian real estate industry at large.
Vancouver kicked off 2021 with hefty sales volumes, higher prices, and momentum to maintain these trends throughout the year. At this stage, it is worth posing the question: is Vancouver’s housing market truly pandemic-proof? We’re diving into the data to understand whether this West Coast market will continue to defy all obstacles.
Home Sales Continue to Surge in Pandemic-Proof Vancouver Housing Market
According to the Real Estate Board of Greater Vancouver (REBGV), residential sales surged 52.1 per cent in January from the same time a year ago, recording just under 2,400 transactions. The composite benchmark price for all property types in the West Coast city climbed five per cent year-over-year to $1,056,600.
Apartment condominiums enjoyed comparable gains in January, surging at an annualised rate of 46.8 per cent to more than $680,000.
Real estate agents are combing through the listings data, finding an imbalance between new and active listings. While new listings increased 15.7 per cent from last year to 4,480, total listings have slumped 3.6% to 8,306 year-over-year.
The gap between supply and demand is leading to a tremendous boom in the Vancouver real estate market, resulting in increased competition and multiple offers. This, of course, triggers an upward pressure on housing prices.
The Trends Gripping the Vancouver Housing Market in 2021
What could be some of the factors at play in the Vancouver housing market over the next year?
The most significant contributor to the real estate sector – in Vancouver and the broader national industry – is interest rates. The Bank of Canada (BoC) has kept interest rates at 0.25 per cent after slashing its benchmark figure by 170 basis points nearly a year ago. The central bank has signaled that it will not tighten monetary policy, preferring to support the recovery, especially as the economy could experience short-term pain. This means that borrowers will experience the lowest borrowing costs on record, and this is giving homebuyers more housing options since they can garner a better bang for their loonies and toonies.
Financial experts are also presenting the case that keeping rates lower for longer – even as reports suggest Canada could be the first major country to taper easing efforts – would be positive news for developers and publicly listed property owners.
Colette Gerber, chair of the REBGV, also anticipates a significant trend in the city’s housing market this year: move-up buyers. This trend has been gradually developing throughout the 2020 real estate boom, and it could become more pronounced over the next several months.
“People who managed to enter the market a few years ago, and have seen their home values increase, are now looking to move up in the market to accommodate their changing needs,” Gerber said in a news release.
Vancouver’s gain could be the region’s benefit, too. Realtors are discussing a “ripple effect” with more investors experiencing the momentum from Vancouver seeping into nearby markets like Fraser Valley.
Will the Vancouver Real Estate Market Nosedive Soon?
Could Vancouver housing prices come back down to earth? Last year, the Canada Mortgage and Housing Corporation (CMHC) predicted that the real estate market would crash as much as 18 per cent from pre-coronavirus prices by the end of 2020. Industry experts have since confirmed that this forecast was way off the mark.
“CMHC doesn’t seem to understand the sheer number of sellers that would have to accept this kind of price reduction, in order for average housing prices to plummet to this degree in such a short time span,” said Christopher Alexander, Executive Vice President and Regional Director, RE/MAX of Ontario Atlantic Canada, in a statement. “Sellers simply won’t accept that kind of discount on their listings. A statement of this nature is panic-inducing and irresponsible.”
The prediction did not age well, with most markets posting record-setting growth. Vancouver homeowners and homebuyers can be confident that a nosedive is to be expected in the local market anytime soon. In fact, according to the RE/MAX Outlook for Vancouver real estate in 2021, housing prices are expected to balloon four per cent to more than $1.32 million.
If this is a collapse, what does a boom look like?