The Royal Bank of Canada is predicting a cooling in both home sales and prices in the next couple of years, but real estate agents and Metro Vancouver scientists say it’s never been that easy.
They agree that the shopper frenzy and price wars that began with the start of the pandemic are starting to subside, but say that this will not necessarily lead to lower prices and most likely will not increase affordability for the average shopper.
Thomas Davidoff, director of UBC’s Center for Urban Economics and Real Estate, said there are different forces at play. On the one hand, stock market volatility and rising interest and mortgage rates should slow down the housing market. But on the other hand, rising rental prices and a constant lack of supply may still push people to buy, Davidoff said.
The Bank of Canada raised its key interest rate by 0.5% in the first week of April and is considering doing so again in June. The initial increase alone is the highest increase in over 20 years.
As a result, RBC predicts that house prices will peak this spring before starting a slow decline at the end of 2023. The change will be most noticeable in high-end markets such as British Columbia, he said.
A group of National Bank Economists predicts that the total price of a home in British Columbia will rise 6.8% in 2022 ($1,059,000 million) but fall 3.8% in 2023 ($1,018,800) before it starts flatten out.
Keith Roy, a 16-year real estate veteran in Metro Vancouver, said that while the market may slow down, any price changes will vary by market segment.
He said a $500,000 two-bedroom condominium in Surrey could be a little cheaper. Buyers in this market segment typically take out mortgages and will be impacted by higher interest rates, pushing up long-term costs and reducing demand.
On the other hand, a $3 million-plus home on the west side of Vancouver may not be affected. Roy said that in April he asked several buyers of such houses why they prefer to buy now, and they told him that they had nowhere else to invest their capital.
These types of buyers, Roy explained, can buy in advance and are not affected by mortgage rates. For them, it is an investment.
Other buyers who are still flocking to the market right now are those who got their mortgage rates pre-approved before the interest rate hike. They now have limited time to buy before they themselves get bogged down in higher rates.
“Little storm right now, possibly before much calmer weather sets in,” said 42-year real estate veteran Lorne Goldman.
He added that he has very little confidence in anyone’s forecasts, but expects home listings to decline while solid sales continue.
“I would say that the fear of missing out may have lessened,” he said.
Gina Rossi, whose sales consistently place her in the top one percent of real estate agents in Metro Vancouver, thinks much the same.
She said she’s seeing a decline in open house attendance and fewer showings, but in-demand home sales remain strong.
Rossi and others have said that with the possibility of a repeat interest rate hike and the uncertainty of the future of the pandemic, it is simply not realistic to truly know what will happen.
Affordable HousingHousing MarketMetro VancouverReal Estate