How hot is the Vancouver real estate market right now? The latest data highlight record-breaking figures.

According to the Real Estate Board of Greater Vancouver (REBGV), Metro Vancouver experienced new records for home sales and listings in March. The latest housing market statistics show that transactions for detached homes soared 79.7 per cent to 1,231, while the benchmark price for the same property climbed 13.7 per cent to $1,621,200. Condominiums are continuing to rebound, with sales rising 65.8 per cent year-over-year to 1,759 and the benchmark price for these apartments edging up 2.5 per cent to $697,500.

For one of Canada’s largest cities, it all comes down to supply. Active listings tumbled 9.1 per cent to 8,358 compared to the same time a year ago. This is 21.2 per cent below the 10-year average for listings. For all property types, the sales-to-active listings ratio for February was 44.6 per cent – anything above 20 per cent suggests home prices are experiencing upward pressure.

“Metro Vancouver’s housing market is experiencing seller’s market conditions. The supply of listings for sale isn’t keeping up with the demand we’re seeing. Competition amongst home buyers is causing upward pressure on home prices,” said Colette Gerber, REBGV Chair, in a news release. “Low interest rates remain a key driver in today’s market. We’re seeing steady numbers of first-time home buyers and move-up buyers entering the market.”

But while these numbers show that the Vancouver real estate market is on fire, some early April figures suggest that the major urban centre on the west coast could be experiencing some cooling off. REBGV numbers indicate that home sales were down fractionally in the first half of April from the same time in the previous month: 2,402 compared to 2,663 in mid-March. Plus, the sales-to-listing ratio dipped to 59 per cent in mid-April, down from 62 per cent in mid-March.

Will the Vancouver Real Estate Market Crash Soon?

In the current Vancouver housing market, real estate agents are monitoring specific industry trends; housing starts and completion figures remain a hot topic. According to the Canada Mortgage and Housing Corporation (CMHC), housing starts topped 50,500 in March, more than double from the same time a year ago. In the first three months of 2021, housing starts have exceeded 110,000. Completions also surpassed 3,000 in March and 7,400 in the overall first quarter.

With more housing inventories coming to market, there could be a slight drop in prices on the horizon. It is unclear if this could satisfy total demand levels, but this is the type of reprieve that the Vancouver real estate market would need to see in the coming months to ease prices.

The other factor driving this urban market is interest rates. The Bank of Canada (BoC) left its benchmark interest rate 0.25 per cent during its April policy meeting, while trimming its weekly bond-buying program from $4 billion to $3 billion. Many market analysts have been flirting with the possibility that a rate hike could douse the red-hot housing sector. But if rates are near historical lows, a more substantial hike may be needed.

Moreover, the chief banking regulator tightened mortgage lending standards that would reduce the size of mortgages households would qualify for by four per cent. Is it enough? Only time will tell.

Right now, first-time homebuyers might need to wait the market out rather than engage in fear of missing out and scooping up the first for-sale sign they see. Prices are at all-time highs, bidding wars are fierce, and additional supply is slowly trickling online. Whether this will lead to a correction or collapse remains to be seen.

What About Foreign Buyers?

For years, many policymakers and housing experts had recommended measures to rein in foreign buyers using the Vancouver real estate market as an investment, artificially lifting valuations and pricing first-time homebuyers out of the market. This led to a 20 per cent provincial foreign buyer’s tax. The municipal empty home tax and the speculation tax that was introduced by British Columbia Premier John Horgan, effectively deterred foreign buyers. In addition to the coronavirus pandemic, and the subsequent travel restrictions, property purchases from foreign homebuyers have significantly cooled off.

In 2019, there were more than 30 foreign-involved sales in five of the 12 months in 2019, resulting in the 20 per cent penalty. From March 2020, there were six months where there were only a handful of transactions consisting of foreign buyers.

So, will most foreigners ditch Canada’s west coast as part of their real estate investment plans? Andy Yan, director of the City Program at Simon Fraser University, told Business in Vancouver (BIV) that a lot has changed across the globe during the COVID-19 public health crisis.

“Of course, the rest of the world has changed. Let’s face it, one of the main sources of growth had been coming in from China, and the Chinese rules – from the people I’ve talked to – have certainly tightened up. That brings a complication that we may not see the [previous high levels of] demand come back in,” he said. “We don’t know what happens globally.… And a lot of things that drive foreign buyers happen outside of Canada. The world in 2021 is vastly different than what it was in 2016.”

The Vancouver Real Estate Market – 2021 and Beyond

Could the Vancouver real estate market expect property prices to ease sometime this year? Many industry experts anticipate that growth will return to single digits later in 2021. But is this a certainty? As the story has been told repeatedly over the last year, there are many factors at play in the Canadian real estate market, with the fundamental principles of supply and demand being the primary drivers.

From monetary policy to government regulations to rising immigration levels, various elements might force first-time homebuyers in Vancouver to adopt a more wait-and-see approach in this kind of environment.