“Gentle Cooling” Witnessed in the Vancouver Real Estate Market

For many years, the Vancouver real estate market has been widely known as one of the most expensive in the world. Driven mostly by the desire to live on the west coast, in view of both the Pacific Ocean and Coastal Mountain range, while simultaneously enjoying the convenience of a buzzing metropolis, it’s hard to deny the lure of Vancouver real estate. And accordingly, the city has in recent years, managed to overtake the Toronto housing market in average property price.

In fact, just recently, Vancouver was aptly named the most unaffordable city in Canada to live in terms of salary versus mortgage.  Coming off the trails of a blazing hot market in 2020, Tom Davidoff, a professor in real estate finance for UBC’s business school, believes the pandemic has impacted the pricing surge for detached homes, “You don’t need to be at the office for a lot of people during COVID. And you do need to be at home. So big space… becomes more attractive relatively during the slowdown.”

While this trend kept pushing upward well into 2021, over the last month it appears as though the Vancouver market could be cooling very slowly, and hopeful homebuyers across BC are breathing a long-awaited sigh of relief.

Vancouver Beginning to Show Signs of Slowing Up

After a hot spring season, it appears as though the Vancouver market may be trailing back to typical seasonal levels. June posted a month-over-month decrease in sales. If this remains consistent over the next few months, it may serve as a sign that the Greater Vancouver Area real estate market is headed into favourable territory.

The month of June has brought some cooling to the records set in March and April this year. The Real Estate Board of Greater Vancouver (REBGV) reported 3,762 residential home sales in the area over June 2021. While this may be a 54% increase over the unit sales in June 2020 and 18.4% above the 10-year sale average for June, it is an 11.9% decrease in home sales compared to May 2021 – indicating the demand may be cooling off a little.

With sales beginning to decrease month-over-month economists are hopeful that the market may begin to revert back to typical levels. Keith Stewart, Economist for the REBGV adds that while the market is still in seller’s territory, it is heading in a more favourable direction: “Metro Vancouver’s housing market continues to experience strong seller’s market conditions, although the intensity of demand has eased from what we saw throughout most of the spring. The past two months have shown a market that’s shifting toward more historically typical conditions.”

While decreasing sales will help the market cool, a more efficient way of swinging the Vancouver market back towards neutral ground would be if sales decreased and both new listings and inventory increased. However, for the month of June, only 5,849 newly listed detached, semi-detached, and apartment properties were added to the Multiple Listing Service (MLS) in Metro Vancouver. This mildly contributed to calming the market as new listings were 1.1% higher in June 2021 than they were in June 2020.

New listings contribute to inventory, and the surge of new listings allowed the inventory to stay relatively stable. At the end of this past June, the total number of homes currently for sale on the MLS in Vancouver was 10,839. This is a little less than the norm as June 2021 inventory is 1.2% lower than May 2021, and 5.1% lower than June 2020. However, if sales trends continue downward and new listing trends climb, inventory should be fairly stable and in alignment with seasonal expectancy.

On a good note, average home prices in the Metro Vancouver area remained fairly steady month-over-month. The MLS Home Price Index composite benchmark price for all residential properties in the area was $1,175,100 at the end of June. While this is a 14.5% increase compared to June 2020, it is only a 0,2% increase over May 2021 – indicating that the market may begin to stabilize.

Will the Vancouver Housing Market Continue to Cool?

As the sticky summer season rolls on, hope remains that the Vancouver market will begin to slow down and work its way back to neutral territory. After months of real estate frenzy, the market is beginning to normalize which will translate to a reduction in bidding wars and (hopefully) average sales price. It looks like Vancouver may be slowly cooling off after all, which is great news for many side-lined buyers who have been pushed out of what was for a long time, the most unaffordable real estate market on the West Coast.

Sources

City News
CBC News
CREA Vancouver