Will Real Estate Prices Drop In Vancouver?
If you are a prospective homebuyer waiting on the sidelines and expecting house prices to drop significantly by double digits this year, then prepare to be disappointed. While the market is in a “correction mode” and has seen a drop in sales and volume, prices have only dropped by a few percentage points. And this trend seems to be bottoming out.
The correction that is being currently experienced has not followed historical patterns. While the volume of homes being traded has dropped considerably, there has not been a comparative drop in prices. Homes that are on the market are still selling relatively swiftly.
Vancouver remains one of the most expensive cities in Canada to buy and home and will remain so for one simple reason – demand exceeds supply. Supply of housing in this market has been a problem that has been exacerbated in the past few years. When there is a supply shortage, sellers will not list their home if they cannot find another home to buy.
According to Phil Soper, CEO and President of Royal Le Page, a large drop in home prices seems very unlikely given several underlying factors.
“Traditional wisdom says that a recession triggers widespread job losses and missed mortgage payments. In this post pandemic period, people have kept their jobs. In fact, they have seen their wages and salaries rise. We have a tightly managed national mortgage portfolio, with historically low default rates, supported by homeowners who have been required to qualify for a loan under the strict federal stress test for the last five years,” Soper said.
He added, “And, we can’t forget that Canada has been grappling with an acute shortage of homes overall. We simply don’t see the factors at play that would result in a large drop in home values.”
While we are still living in uncertain times with interest rates and inflation at levels not seen for decades, there are signs that inflation is being tamed and the Bank of Canada will ease off its rate increases, which it has used as an effective measure to bring the inflation rate down.
This will certainly boost confidence in the economy and spur on those buyers who have been waiting on the sidelines. According to the BC Real Estate Association (BCREA), the housing market in BC is expected to see a strong rebound in 2024, however the lull that began in 2022, will continue well into 2023.
Property ownership in Vancouver has been beneficial, and returns have been historically high. Vancouver has a strong economy and has been a magnet for the thousands of immigrants who chose to make Canada their new home every year. The supply of homes for sale must exceed the demand for prices to drop materially, and with the current long-term housing supply shortage, prices in Vancouver will continue to rise for the foreseeable future.
Home sales are making a stronger than expected spring showing, despite elevated borrowing costs. If you are ready to make a real estate transaction, contact us or let’s chat on 604 913 1000 and get the benefit of our experienced real estate advisors.