One of the largest cities in Canada is also home to one of the hottest real estate markets in the country.
The Vancouver housing market, despite being no stranger to seller’s market conditions, has been burning hot since the aftermath of the first wave of the coronavirus pandemic. After the initial pause and uncertainty surrounding the once-in-a-century public health crisis, the Vancouver real estate market – from detached homes to condominium apartments – has been skyrocketing, with the average property selling for well over $1 million. But are these trends anticipated to continue into 2021?
All of the most recent numbers are pointing to a gradual shift downward as price growth eases. Some homes are even being sold below the asking price, contrary to the last year of bidding wars, bully offers, blind bids, and over-the-top above-asking sales.
Has the on-fire real estate market in Vancouver been doused? The May 2021 figures should offer some insight into what is happening in this west coast housing market.
Is the Vancouver Housing Market Showing Signs of Cooling?
In May 2020, the Vancouver real estate market began its recovery and headed on an upward trajectory, notable in the archived Real Estate Board of Greater Vancouver (REBGV) data. But the momentum is starting to ease if the numbers are assessed on a monthly basis.
According to REBGV, residential sales spiked 187.4 per cent year-over-year in May to 1,485 units. However, on a month-over-month basis, home transactions slumped 13 per cent.
Vancouver real estate prices are also taking a breather, with MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver up just 1.5 per cent to $1,172,800. The various properties experienced only a slight uptick:
- Detached: +1.7%
- Attached: +1.8%
- Condominiums / Apartments: +1.2%
What exactly is going on to ease the activity in one of Canada’s largest cities? Supply is coming to the housing market.
There were 7,125 detached, attached, and apartment properties newly listed for sale in May, data from the Multiple Listing Service® (MLS®) in Metro Vancouver show. This is up 93.4 per cent from the same time a year ago, but it is down 10.2 per cent from April 2021.
Meanwhile, the total number of homes presently listed for sale has climbed 10.5 per cent year-over-year and 7.1 per cent month-over-month.
When you factor new mortgage stress tests and rising mortgage rates, the meteoric price growth from the last year begins to subside, says REBGV economist Keith Stewart.
“While home sale and listing activity remained above our long-term averages in May, conditions moved back from the record-setting pace experienced throughout Metro Vancouver in March and April of this year. With a little less intensity in the market today than we saw earlier in the spring, home sellers need to ensure they’re working with their REALTOR® to price their homes based on current market conditions,” he said.
“With sales easing down from record peaks, a revised mortgage stress test that reduces the maximum borrowing amounts by approximately 4.5 per cent, and the average five-year fixed mortgage rates climbing back over two per cent since the beginning of 2021, we’ll pay close attention to these factors leading into the summer to understand what affect they’ll have on the current market cycle.”
It also helps that housing starts are picking up pace. According to the Canada Mortgage and Housing Corporation (CMHC), housing starts clocked in at 2,558 in May, up from 2,094 in the previous year. In the first five months of 2021, housing starts in Vancouver have topped 11,500.
Foreign Buyers Are Coming Back to Vancouver?
If you build it, they will come. It turns out that foreign buyers are coming back to the Vancouver real estate market, according to new CMHC data. As inventory levels begin to rise on the west coast, non-Canadian investors are scooping up the fresh supply as the rate of non-resident ownership increased to 1.9 per cent last year, up from 1.5 per cent in 2019. Moreover, 1,850 condo units were purchased by non-residents in 2020, up 31.4 per cent from the previous year. While this number is creeping up, it remains below 2018 figures.
Will the Metro Vancouver Real Estate Market Ease Even Further?
Housing stocks on the rise? Check. Fresh real estate construction projects? Check. A mortgage stress test to reduce the number of buyers? Check. What comes next to ease the red-hot Vancouver real estate market further could be an increase to interest rates. However, the Bank of Canada (BoC) noted that it does not anticipate rate hikes until next year, giving some additional room for modest gains in sales activity and valuations for the second half of 2021.
The one factor that could prevent this downward pressure in prices is a notable increase in immigration. The federal government is poised to relax border restrictions, facilitating an inevitable population boost in the major urban centres of Toronto and Vancouver. A jump in demand would potentially offset the fresh real estate supplies.
That said, industry observers anticipate that price growth may not be as fierce over the next 15 months as it was over the last 15 months.