A lot has changed over the last 12 months. At this time, a year ago, interest rates were hovering slightly above zero per cent, the Canadian real estate market was still booming, and the rise in inflation had only just begun. Today, the nation’s economic landscape has slowed considerably. Interest rates are the highest they have been since the 2008 global financial crisis. Canada’s housing sector has cooled off significantly, and the consumer price index (CPI) has likely peaked and is heading downward. Nearly every Canadian real estate market has seen the effects of these factors, including one of the country’s largest cities. While prices in the Vancouver real estate market remain elevated, the West Coast urban centre has watched residential sales activity plummet to its lowest level since 2018. Because rising borrowing costs are expected to persist in 2023, coupled with more inventory coming online, the Greater Vancouver Area (GVA) may add to its downward pressures.
A Look at the Greater Vancouver Real Estate Market
According to the Real Estate Board of Greater Vancouver (REBGV), residential property sales cratered nearly 52 per cent year-over-year, totalling fewer than 1,300 units in December. On a month-over-month basis, home transactions fell close to 20 per cent. Overall, December sales were 37.7 per cent below the 10-year average for this time of the year.
The MLS® Home Price Index (HPI) composite benchmark price did show that residential property prices topped $1.1 million in December. But this was down 3.3 per cent from a year ago, 1.5 per cent from November 2022, and 9.8 per cent over the past six months. So, although benchmark prices were north of $1 million, they did come down at a notable pace when assessed based on a six-month span.
Here is a breakdown of prices from the June-to-December period:
- Detached Homes: -11.4 per cent to $1,823,300
- Attached Homes: -9.2 per cent to $1,012,700
- Apartment Units: -6.9 per cent to $713,700
The $1.1 million question is how did the Vancouver housing market perform as a whole in 2022? Here is another breakdown of what occurred over the last 12 months:
- Residential Home Sales: -34.3 per cent to 43,999 units
- MLS® Home Price Index (HPI) Composite Benchmark Price: -16 per cent to $1,114,000
- Total Residential Listings: -3.2 per cent below the ten-year average
- Housing Starts (January to November): -4.07 per cent to 22,858 units
“The headline story in our market in 2022 was all about inflation and the Bank of Canada’s efforts to bring inflation back to target by rapidly raising the policy rate. This is a story we expect to continue to make headlines into 2023, as inflationary pressures remain persistent across Canada,” said Andrew Lis, REBGV Director of economics and data analytics, in a statement. “Closing out 2022, the data show that the Bank of Canada’s decisions to increase the policy rate at seven of the eight interest rate announcement dates in 2022 has translated into downward pressure on home sale activity and, to a lesser extent, home prices in Metro Vancouver.”
But will these trends persist in the upcoming year2023 ?
2023 Outlook for Vancouver Real Estate
According to the RE/MAX 2023 Canadian Housing Market Outlook, the Greater Vancouver Area is projected to see a five per cent drop in the sales price and a 20 per cent collapse in unit sales.
The significant trend over the next year will be the GVA slipping into a balanced market, says Tim Hill, RE/MAX All Points Realty agent, in the 2023 outlook.
“A big priority for homebuyers will be weighing value against opportunity in the market, with upsizing being top of mind. On the flip-side, first-time homebuyers will be able to take advantage of a cooling market and make offers with conditions,” he said. “Interestingly, it will be first-time home buyers that will facilitate move-up and move-over buyers to sell their first properties and upsize. I believe this will be a major factor and growing trend in the GVA real estate in 2023.”
Here are some other key developments to monitor:
- Single-detached homes will continue to be the most desired type of housing
- The upsizing trend will become more popular.
- Condo prices will extend their slump.
- The luxury market will likely have a slow start to the year and balance out in the second half of 2023.
This could be the norm for not only one of Canada’s most populous urban centres but also for much of British Columbia, according to Brendon Ogmundson, the chief economist at the British Columbia Real Estate Association (BCREA).
While the central bank is close to the end of its tightening cycle, “elevated mortgage rates will continue to constrain sales activity.” However, with many market observers and economists anticipating a slowdown in the size and frequency of the BoC’s rate hikes, “mortgage rate relief may be on the horizon.” And this could be a good sign for the housing market.