A recent forecast presentation by our board’s economist had three takeaways:
Year-over Year sales will decline 9 to 20 percent in 2022
It’s difficult to set a record for sales two years in a row, so the real question is what kind of decline will we see? Our forecast sees a decline of around 12.5 per cent for the Real Estate Board of Greater Vancouver (REBGV) area, which would be approximately 38,600 sales compared to the record of nearly 44,000 sales in 2021. The declines will vary between areas and property types.
And while doom-and-gloom media headlines would jump on a double-digit decline in a year-over-year sales total, context is important to keep in mind. A sales total of 38,600 in 2022 would be 17 per cent above the 10-year average for the region and would register as the fourth-highest total in the last 10 years.
A continuing lack of supply will keep upward pressure on prices
There hasn’t been a smaller pool of homes for the region’s buyers to choose from to start a new year in the last 30 years. Low inventory has been the key driver behind the price growth we saw throughout 2021, and it doesn’t look like there will be relief until at least the second half of 2022.
What will help inventory replenish? New construction of a diverse and more streamlined supply of homes coming onto the market would help break the logjam of availability. The ugly answer? The continued deterioration of affordability will push more potential buyers out of the market.
The X factors: Government intervention and rising interest rates
Rumblings about potential interventions from both the federal and provincial governments have been growing. Provincially, it’s likely the government will implement a cooling-off period for all resales in BC, like what’s in place for pre-sales. Federally, there’s been talk of an “anti-flipping” tax and a ban on so-called blind bidding.
And we already saw interest rates creep up to close 2021. The Bank of Canada will raise rates this year, which will have a suppressing effect on sales. A sharper rise in rates, especially early in the year, will in turn see a sharper decline in sales.