Metro Vancouver House Price Forecast to December 2020
Prices in Metro Vancouver continue their downward trajectory but are still far beyond what would be considered affordable. At this point, price declines appear to be part of a long-term trend in Metro Vancouver.
Vancouverites like to compare the local market to other global cities, so it is important to point out that most of Vancouver’s market indicators are similar to those seen recently in San Francisco, Manhattan, Sydney, Stockholm, and London. These markets have weakened significantly and home prices have been dropping in what has been described as a synchronized global real estate slowdown.
Add recession risks to this mix and we are left with a cocktail of uncertainty.
This article covers:
How did prices perform last year?
Where are Vancouver prices headed in 2020?
Why prices are going in that direction?
What should sellers do?
What should buyers do?
How did Vancouver home prices perform last year?
In December 2018, we forecasted that by December 2019 prices of all property types would drop. Condo prices have already dipped to $650,000 which is well below the low end of our forecast for the full 2019 calendar year. Single-family house prices are on course to sink well below as $1,400,000 by the end of the year. The benchmark price for detached houses currently sits at $1,423,500 and that’s at the end July when the real estate price cycle is at its seasonal high point.
Where are Vancouver home prices headed in 2020?
In 2018, the most optimistic home price forecast called 6% price growth while the most conservative expected no price appreciation at all. No one predicted prices would drop but in Metro Vancouver they dropped by 3%.
Looking forward to 2019, most forecasters expect Vancouver prices to drop.
The brunt of price drops will likely be felt by higher priced properties (i.e., more expensive neighbourhoods and detached single-family homes). Metro Vancouver house prices have already dropped 4% since the beginning of 2019.
Given the current market weakness and the growing downward price pressure, prices will likely drop for the next few months. Homebuyers and homeowners shouldn’t expect much price appreciation between now and the end of 2020.
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Why are Vancouver Home prices dropping?
Trending Towards a Buyer’s Market
What does this mean exactly? Well, the market for all homes (detached, townhome, condo) are all trending toward a position where buyers have more negotiating power than sellers. This means buyers can leverage the more abundant supply to negotiate discounts and incentives. The positive outcomes for buyers are lower prices, more selection, fewer bidding wars, and ultimately a little less stress.
Not all markets have officially made it to full-blown buyer’s advantage. While the condo market is trending towards a buyer’s advantage, it’s currently a balanced market. As supply increased and the market became balanced, Vancouver home prices dropped and this means that current Vancouver condo prices may be unsustainable in a regular healthy balanced market. So, if some of the 41,000 homes under construction complete later this year and push the condo market into a full-blown buyer’s advantage then we could see major prices discounts in late 2019-2020. Yay for first-time home buyers!
Foreign Capital is Moving From Western to Eastern Canada
In the past year, the foreign money pouring into Vancouver and British Columbia appears to have moved to Toronto, Montreal, and Ottawa. In particular, the Ottawa property prices have grown dramatically.
Metro Vancouver house prices are some of the highest in the world (i.e., foreign investors like to buy low and sell high). Therefore, investors have shifted to cheaper locations such as Ottawa. Evidence for this shift in investor interest is seen in the dramatic drop in Vancouver home purchases and simultaneous upswings of activity in Toronto, Montreal, and Ottawa. Homes in Richmond, BC are very popular with foreign speculators so they are a great indication of the trend in capital flows. The chart below makes it clear to see that foreign demand has sunk.
Other factors driving the slow-down
At Mortgage Sandbox, we break down our market analysis to five key factors: affordability, capital flows, government policy, supply and popular sentiment. Read the full report to understand how these factors are affecting prices in Metro Vancouver.
What should Buyers do?
In Metro Vancouver buyers of homes have more negotiating power and their power has been growing every month. So long as you aren’t taking on an uncomfortable amount of debt and this is your “forever home”, 2020 will be a good time to buy but early 2021 may be even better.
At the end of the day, a home is a place to live more than it is an investment. If you feel you need a home to have the lifestyle you’ve always wanted, then now is the best time since 2008 to be a buyer. Just be sure to drive a hard bargain and keep in mind that prices will likely continue to drop after you buy your home. It’s impossible for everyone to perfectly time the peaks and troughs of the market.
What should Sellers do?
Real estate holds more uncertainty for sellers. Current forecasts would indicate that the longer you wait the less you’ll get for your home. In the early 1990s, Toronto saw a dramatic real estate correction and it took almost 20 years for prices to match their previous peak. There’s no guarantee that’s the case in Vancouver; however, there are some respected economists that have been warning of risk in the market for some time. If you don’t like risk and you know you need to sell in the next 5 years, it may be prudent to list earlier rather than later.
For the latest market information for Metro Vancouver and specific real estate trends in the City of Vancouver, North Vancouver, Richmond, Burnaby and Surrey, bookmark our Metro Vancouver Real Estate Insights page.
In summary, we think prices could drop by another $200,000 between now and December 2020. However, be aware of the seasonal real estate price cycle. Prices are typically have more upward pressure between February and July, then stabilise in late summer before experiencing downward pressure through to the end of January. If you’re looking to buy your first house, it may be worth waiting until January 2021 to avoid losing equity on a home bought now. If you own a condo or townhouse and want to upgrade to a house, we expect the price gap between houses and other homes to get smaller between now and 2021. As an investor, be cautious and wary of the risks present in the current market.