Has Vancouver’s hot real estate market finally started to cool down?
“There’s definitely a downturn now. I can feel it. I can feel it,” said a local realtor, as buyers take longer to make decisions.
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Homebuyers are showing less urgency and changing their approach to shopping as an economist predicts a rapid rise in interest rates will drive prices down in expensive markets like British Columbia.
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“There is definitely a slowdown now. I can feel it. I can feel it,” said Mayur Arora, real estate agent for One Flat Fee, who has clients in Metro Vancouver and the Fraser Valley. “Markets are driven by sentiment, and now sentiment is heading for a downturn.”
He said there is generally less optimism among potential buyers, leading to hesitation about whether prices can be lowered if there are fewer or no offers.
“Before, people were like, ‘What do I have to do to get this property?’ And now it’s, “Let’s wait a few days for the price to drop and then we can move forward.
“A few weeks ago, it was open doors at the weekend and then offers on Monday or Tuesday, with guaranteed sales. Now it’s private screenings and extremely low open house traffic, with no offer guarantees.
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Arora said the market was mainly reacting to the Bank of Canada’s decision in mid-April to raise its key interest rate by half a point to 1%. He said the bank intended to make further hikes as it worked to reduce the inflation rate to a target of 2% from 6.7% in March.
On Monday, Bank of Canada Governor Tiff Macklem said the key interest rate could rise another half a percentage point in June to contain inflation.
READ MORE: What Metro Vancouver real estate agents are saying about the housing market
Because of this change, some economists like Robert Hogue of RBC Economics predict that downward pressure on prices will be most acute in Vancouver and other expensive markets.
In his latest Housing Outlook, Hogue predicts the overall home price in British Columbia will fall 3.8% in 2023 to around $1.02 million. This is the largest decline he predicts for any province in the country, with Ontario posting a 2.3% drop.
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The increase in the Bank Rate over the next few months could reach 2%, slightly above pre-pandemic levels of 1.75%, making it the biggest jump in such a short time since a cycle tightening dating back to 2005-2006, according to Hougue.
Lying buyers will have to pull out, and even those who qualify will see the size of mortgages they can get shrink, he wrote. For households earning the median income, the rise in fixed mortgage rates will reduce many buyers’ maximum purchase budget by about 15%, which will more than offset the increase in 2020 and early 2021 when the decline lower interest rates gave buyers more money to work with.
Arora said today’s market is definitely interest rate obsessed, but he said, “I bet if tomorrow the focus was on how many immigrants are coming to the Lower Mainland and on the scale of the housing shortage is a real crisis, the market would actually start to get busy again.
— with Canadian Press file
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