The Royal Bank of Canada is predicting a cooling of both home sales and prices in the next couple of years, but Metro Vancouver real estate agents and academics say it is never that simple.
They agree the buying frenzy and bidding wars kick-started when the pandemic began are starting to abate, but say that won’t necessarily translate into cheaper price tags and very likely won’t convert into increased affordability for the average buyers.
Thomas Davidoff, director of the UBC Centre For Urban Economics And Real Estate, said there are different forces at play. On one side, stock market volatility and rising interest and mortgage rates should be slowing the housing market. But, on the other side, increasing rental prices and a perpetual lack of supply could continue to push people to buy, Davidoff said.
The Bank of Canada raised its key interest rate 0.5 per cent in the first week of April, and is considering doing it again in June. The initial hike alone is the highest increase made in more than 20 years.
As a result, RBC is predicting housing prices will peak this spring before beginning a slow decline into the end of 2023. It says the change will be most pronounced in pricey markets like B.C.
The national bank’s economics team forecasts the aggregate price of a B.C. home will increase 6.8 per cent in 2022 ($1,059,000 million) but drop 3.8 per cent in 2023 ($1,018,800), before beginning to level out.
Keith Roy, a 16-year real estate veteran in Metro Vancouver, said while the market may slow, any changes in price will differ by market segment.
He said a $500,000 two-bedroom condominium in Surrey could see a small drop in price. Buyers in that market segment are typically taking out mortgages and will be impacted by increased interest rates, thus raising long-term costs and lowering demand.
A $3-million-plus home in the west side of Vancouver, on the other hand, may not be affected. Roy said he asked multiple buyers of such homes in April why they are choosing to buy now, and they told him they have nowhere else to put their capital.
These kinds of buyers, Roy explained, can buy upfront and aren’t affected by mortgage rates. For them, it’s an investment.
Other buyers still flocking to the market right now are those who got pre-approved for mortgage rates before the interest rate hike. They now have a limited time to purchase before getting caught up in higher rates themselves.
“Right now there is a little bit of a storm, potentially before much calmer weather comes,” 42-year real estate veteran Lorne Goldman said.
He added he puts very little reliability on anyone’s predictions, but expects to see the number of offers on homes decline while steady sales continue.
“I would say the fear of missing out is maybe being reduced,” he said.
Gina Rossi, whose sales have consistently landed her in Metro Vancouver’s top one per cent of real estate agents, has similar thoughts.
She said she’s seeing lower traffic at open houses and fewer showings, but that sales remain strong for sought after homes.
With the possibility of interest rates going up again and the uncertainty of the future of the pandemic, Rossi and others said it’s just not realistic to truly know what is to come.