Real Estate Trends to watch for as BC Reopens
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by Richard Morrison
- June 30, 2022
- News
- 0
It’s clear that the British Columbia real estate market has been booming over the past year. We’ve seen significant increases in home sales and prices since the pandemic started in March 2020. As a growing percentage of the population is vaccinated and more people are being tested positive for COVID-19, the province has entered phase 3 of BC’s Restart Plan. BC should enter phase 4 by September 7, 2021, if hospitalizations and case numbers continue to fall.
As Canada reopens its doors for business after the shutdown, there are many Real Estate Trends to watch for as the market recovers. In particular, there are some trends that could prove to be game-changers. In particular, the supply of available properties will likely be limited. With pent-up demand so great, sellers will be hesitant to list their property. Ultimately, this will affect pricing.
Table of Contents showKey Takewaway
There are many trends that will impact BC’s real-estate market, and these rapid changes have been so significant. COVID-19 was a major change in the BC real estate market, and it will continue to have an impact on the market. Here are the main real estate trends that you need to be paying attention as BC reopens:
- Rising Interest Rates
- Record sales may slow.
- Revised Mortgage Stress Test: Implications
- Sales-to-Active Ratio
Monthly-over-Month New Active Listings- Office Vacancy Rates
Household Preference Changes
A recent survey of real estate professionals by PwC and the Urban Land Institute found that over half of respondents were looking to purchase apartments in cities with moderate incomes, while a fifth said they would prefer to rent low-income properties. In terms of retail, multi-family rental properties are also a strong investment prospect. Combined with the rise of e-commerce, this could make work-from-home options the new norm for many Canadians.
The Impact of Rising Interest Rates on the Housing Market
The Bank of Canada raised interest rates to an new high since 2007 after the pandemic and inflation data. The rates have remained at 0.25 per cent for the past year.
Benjamin Tal, CIBC’s Deputy Chief Economist, said that Canadians are sensitive to higher interest rates. The US Federal Reserve has stated that they will not touch rates until 2023. However, Tal believes Canada could move faster. It is possible that home price growth will slow as interest rates in Canada return back to pre-pandemic levels.
Predicting a Slowdown in Record Sales
The sales volumes are at an all-time high, with 14,000 units being sold per month surpassing the 2016 highs. The demand has outpaced the supply and units are no longer staying on the market very long. It’s not unusual for homes in Greater Vancouver to be sold in one weekend.
Although it is difficult to predict when sales will slow, the Canadian Real Estate Association (CREA), expects that housing activity will ease in the second half of 2021 as well as into 2022. According to the association, sales drops are expected to be the greatest in BC as well as Ontario.
Understanding the Implications of the Revised Mortgage Stress Test
New rules were introduced to try and cool down the hot housing market. It is important to ask the question, “Will it work?” This is the revised mortgage stress test. It’s a rule that will allow homebuyers to get mortgages at twice the current rates. The minimum qualifying rate is the rate offered to you by your lender, plus 2% or 5.25%.
The revised mortgage stress test is said to decrease homebuyers’ buying power by as high as 4%. The new rules may make it more difficult for those trying to enter the market.
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Analyzing the Sales-to-Active Ratio in Real Estate
An analysis of sales to active listings is one way to determine if we are currently in a seller’s or buyer’s market. Sales to active listings ratios have reached all-time highs across most of the province, with a particular focus on Greater Vancouver. The June sales to active listing ratio was 39% in May, but it was only 34.7% in Greater Vancouver. This is still a strong indicator of a seller’s market. This is usually defined as any market with a sales-to-active listings ratio greater than 20%.
A buyer’s market would be one where prices are declining. To achieve this, the sales-to-active listings ratio must fall below 12%. While we are still far from this number, it is worth keeping an eye on to see if it continues to drop lower.
Tracking Monthly New Active Listings Trends
Month-over-month changes in listings are another important trend to watch that is moving downward. Here are the numbers of new listings in Metro Vancouver for April, May and June.
April: New listings for detached, attached and apartment properties in Vancouver
May: 7125 detached, attached and apartment properties are now listed in Metro Vancouver
June: New listings for detached, attached and apartment properties in Metro Vancouver.
Many people have called for more supply in Metro Vancouver to meet the demand. However, there are fewer homes on the market, making it difficult to see how buyers will be able to find homes anytime soon.
Examining Office Vacancy Rates and Their Effects
The MLS Home Price Index gives information about the benchmark home prices in BC, including information on detached homes, townhomes, and apartments. It is possible to view the benchmark prices for individual cities and regions, which can help you spot trends in BC as it reopens. The prices are steadily rising month over month as many communities across the province experience record highs. MLSHPI Benchmark Prices provide a great overview of the market.
Adapting to Shifts in Household Preferences
Canadian commercial real property was hard hit by the pandemic. But things are improving or even better. CBRE’s new report suggests that office vacancy is slowing, and industrial demand is at unprecedented levels. With Vancouver’s low industrial availability rate of 1.1% and rising land costs, CBRE predicts that Vancouver will run out of industrial space within six months.
Expect to see a decrease in office vacancy rates as more workers return home to major cities centers in the not too distant future.
Evolving Household Preferences and Real Estate Dynamics
The most important trend to watch as BC reopens will be whether household preferences match pre-pandemic interest. While many policymakers believe that preferences will naturally decline due to the pandemic, others believe that the new dynamic is here for the taking.
We’ll see shifts as some people return to work and others work remotely. Many people moved away from the city to find more affordable, spacious housing. These preferences will be reflected in the market when BC reopens. It will take time to see if they will.
How will the Real Estate Trends in BC affect the Best Places for Young Adults to Live?
With rising prices and limited availability, affordability becomes a key factor in determining suitable options. However, some top bc regions to live, like Victoria and Kelowna, may still attract young adults due to their vibrant communities, job opportunities, and desirable lifestyle.
Summary
The real estate market in British Columbia has been affected by the COVID-19 pandemic. Interest rates have risen, which may slow sales, and the mortgage stress test has been revised, creating implications for buyers and sellers. The sales-to-active ratio has also decreased, and monthly-over-month new active listings have dropped significantly.
Office vacancy rates are also higher due to increased work-from-home requirements.
Finally, household preferences have changed, with buyers looking for more outdoor and home workspace options.
Sources:
https://www.cbc.ca/news/canada/british-columbia/northern-bc-real-estate-1.5697892
https://globalnews.ca/news/7574344/bc-real-estate-gains-coronavirus/
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Ready to turn your real estate dreams into reality? Contact Richard Morrison, Vancouver’s top realtor with 20+ years of experience. As a Medallion Club member and RE/MAX Hall of Fame award winning agent, he’s the expert you need on your side. Whether buying, selling, or investing, Richard’s personalized approach and deep market insights ensure a successful transaction. Reach out to Richard today at (778) 900-2235 and make your real estate journey seamless and rewarding.
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