Buyers poised to benefit from moderating prices and reduced real estate sales activity!
In July, sales activity continued to slow as compared to 2021. Prices also continued to moderate following the peak seen in March 2022, however, benchmark prices in the Greater Vancouver Area remain ahead of last year by a significant margin. The benchmark price for all housing types in the Greater Vancouver Area was $1,207,400. This represents a 10.3% increase over July 2021.
The Real Estate Board of Greater Vancouver reports that residential home sales in the region totaled 1,887 in July 2022, a 43.3% decrease from the 3,326 sales recorded in July 2021, and a 22.8% decrease from the 2,444 homes sold in June 2022.
The total number of homes currently listed for sale in Metro Vancouver is 10,288, a 4.4% increase compared to 9,850 listings in July 2021, and a 1.3% decrease compared to 10,425 listings in June 2022.
Benchmark price activity by home type:
The benchmark price for detached homes increased by 11% year-over-year to $2,000,600 but decreased by 2.8% month-over-month.
The benchmark price for attached homes increased by 15.8% year-over-year to $1,096,500 but decreased by 1.7% month-over-month.
The benchmark price for apartment homes increased by 11.4% year-over-year to $755,000, but decreased by 1.5% month-over-month.
A Market of Opportunity
Current market conditions contrast those seen last summer in the throws of the pandemic. With more choice and more value for money, particularly in the detached property segment, buyers looking to enter the market or move up the property ladder are entering a period of strategic opportunity.
“It is important to keep in mind that real estate is and always will be an asset with considerable upside over the long-term,” said Fraser Valley Real Estate Board President, Sandra Benz. “ As prices come down from the highs of recent months, there are opportunities for buyers who have been waiting to re-enter the market and shop for the right property.”
A more balanced market offers benefits to buyers and sellers. For buyers, the ability to negotiate, both in terms of price and the terms of the purchase agreement are a welcome relief after years of intense competition in the market. Daniel John, Real Estate Board of Greater Vancouver Chair said, “After two years of market conditions that favored home sellers, home buyers now have more selection to choose from and more time to make their decision”.
For sellers, while prices have softened from the record highs seen earlier this year, year-over year price appreciation is still reflected in current sale prices, and long term gains are north of 75% over a ten-year period in Metro Vancouver.
The questions weighing on British Columbians in this market – how much more will interest rates rise, and will they go back down?
The Bank of Canada is set to make its next interest rate announcement on September 7th. While the Bank was aggressive during its July 12th announcement increasing rates by a full percentage point, the Bank is still targeting a rate of around 3.5%, meaning future increases will likely not be as high as the one we saw in July.
Over the past 30 years, there have been six cycles of interest-rate hikes. Those cycles ranged from 1.25 to 3.2 percentage point increases. In all of these previous cycles, periods of interest rate increases were followed by periods
of interest rate decreases.
The Financial Post recently published this article detailing these historical interest rate patterns in Canada. While it is anticipated that the Bank of Canada will raise interest rates again this fall, if history is to repeat itself, these rate hikes may be temporary and followed by declining rates sometime in 2023.
Canada’s Mortgage Stress Test
With interest rates rising to historically ‘normal’ levels, there has been debate as to whether the mortgage stress test continues to serve the purpose it was originally designed for, which is to ensure Canadians can afford their mortgages outside of a low interest rate environment.
With the Bank of Canada eyeing a rate in the mid-3% range and fixed-rate mortgages currently being offered at a moderate rate of around 5%, policymakers are being questioned on the current utility and impact of the stress test.
Regulators are leaving the door open to changes to the stress test before the end of this year. We will be watching this issue closely as higher interest rates endure for the remainder of 2022.
Interested in Fraser Valley Valley Market Stats? Scroll through the pdf below, pages 8 to 16.
JUNE CONWAY July 2022 Market Update Sussex