The current housing market in Greater Vancouver presents a timely opportunity for astute buyers. As interest rates have risen over the past year, the average home price has experienced downward pressure, leading to a decrease in the average cost of housing and the potential to build equity in the longer term for those willing to take advantage of this market correction. As interest rates settle in 2023, property values are expected to consolidate and begin to increase in the latter half of the year, resulting in positive equity growth for early buyers.
“Due to seasonality, market activity is quieter in January. With mortgage rates having risen so rapidly over the last year, we anticipated sales this month would be among the lowest in recent history,” said Andrew Lis, REBGV’s director, economics and data analytics. “Looking forward, however, the Bank of Canada has said that it will pause further rate increases as long as the incoming economic data continues to support this policy stance. This should provide more certainty for home buyers and sellers in the market.”
Detached housing in Greater Vancouver has experienced the largest decrease in value, with an average price of $1,909,101 in January, a 17% drop from its peak in February 2022 of $2,306,603. On the other hand, the condo market has remained relatively stable, with an average sales price of $758,855 in January, a 12% decrease from the all-time high in February 2022 of $846,610.
Inventory and New Listings Off to a Slow Start
Total inventory across all asset classes in January was 7,389 active listings, a 19% year-over-year increase. The condo market saw the most new listings with 1,699, while the detached market had the lowest January total in recent history with only 1,035 new listings.
The lack of new inventory is creating increased competition for desirable homes, particularly in the low-rise category. Buyers who held off last year on making a move are now competing for quality homes, and in some cases finding themselves in multiple offer scenarios given the insufficient number of listings on the market. Sellers looking to list their home in the remaining winter months may be pleasantly surprised by the attention a well maintained, well priced home will receive in this current market.
Bank of Canada Announcement Provides Assurances to Consumers
On January 25th, in light of higher than anticipated employment numbers in December 2022, The Bank of Canada raised its benchmark interest rate by 25 basis points, to 4.5%. While this was the Bank’s eighth consecutive interest rate increase, the announcement was primarily significant due to the Bank’s inclusion of forward guidance that it expects to hold off on future rate hikes. Economists are already predicting that the Bank of Canada will turn its focus to easing monetary policy by the end of this year. This shift allows consumers to once again rely on mortgage interest rates remaining steady and with that, renews confidence that real estate will not see the declines in value in 2023 that we saw in 2022.
A contrarian mindset has been beneficial for past purchasers who chose to buy during the market corrections in 2019 and 2009. While the Covid-driven anomalistic growth trend which saw values increase 42% between June 2020 and February 2022 may be behind us, savvy buyers are keen to pick up properties off the peak with less competition than the recent years afforded.
“We know the peak for prices in our market occurred last spring. Over the coming months, year-over-year data comparisons will show larger price declines than we’ve been reporting up to now,” said Lis. “It’s important to understand that year-over-year calculations are backward-looking. These price declines already happened, and what we are seeing today is that prices may have found a footing, even if it’s an awkward one sandwiched between low inventory and higher borrowing costs.”
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Royal LePage Sussex