Metro Vancouver Real Estate

Trends and Price Forecast

Vancouver, BC

Updated October 4, 2019

HIGHLIGHTS

  • Buyer interest has picked up a bit in the past few months - better than 2018 but nowhere close to 2016/17 levels.
  • Metro Vancouver home prices are dropping and the market is headed towards a buyers’ advantage.
  • The average Metro Vancouver household still can not afford current house prices.
  • High-end markets like Downtown, West Vancouver, and the Vancouver Westside have been hit hardest by the market downturn but the surrounding areas are also impacted.
  • Foreign speculative investors are leaving Metro Vancouver and prices are now being supported by local economic fundamentals.

Prices in Metro Vancouver are continuing their downward path 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. The industry is trumpetting increased buyer interest in the past few months (i.e., more homes are being bought) but they fail to mention that there are more homes for sale than in prior years so negotiating power still resides with buyers.

Some people blame the price drops on higher interest rates and tighter mortgage rules, but these arguments don’t hold much weight. Mortgage rates are still at rock-bottom lows and the market weakness began in 2016 when foreign buyer taxes came into effect rather than in 2018 with the introduction of the stress test. As well, Toronto home prices have been rising at an alarming rate with the stress test in place and with current interest rates. Vancouver house prices have primarily weakened because foreign direct investment has shifted to Toronto and Ottawa.

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.

This article covers:

  1. Where are Metro Vancouver prices headed?

  2. What are Purchase and Listing Trends ?

  3. Should investors sell?

  4. Is this a good time to buy?

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1. Where are Metro Vancouver prices headed?

Home Price Overview

The good news (for buyers) is that prices are dropping in Metro Vancouver, but the not-so-good news is that prices are still beyond the reach of a median Metro Vancouver household with an income of $75,000 (before taxes). There is, however, a glimmer of hope for buyers as prices continue dropping through 2019.

Metro Area Detached House Prices

Since the peak in 2017, Metro Vancouver house prices have dropped over $200,000.

From the beginning of 2015, Metro Vancouver house prices climbed $600,000 to a peak of $1.6 million. House prices subsequently dropped $120,000 the next year and then recovered. Now prices are dropping once again. Metro Vancouver house prices are very volatile. The value has already dropped $200,000 since the peak, and it’s possible that prices might drop another $200,000 between now and the end of 2020. If you’re looking to buy or sell your home in the next three years, you should definitely pay close attention later in this article when we explore recent trends in buyer and seller behaviour.

West Vancouver, Downtown, and the Vancouver Westside are the hardest hit but Richmond and East Vancouver have seen significant price declines too.

Expensive houses are sitting on the market for months. Some houses have been on the market since 2017 and still haven’t sold. Only the less expensive homes are finding interested buyers. Eventually the nicer/larger homes (or mansions) will drop in price and this will shift the prices downward for more modest homes. In 2020, we may even see a Westside house listed for under $1.5 million!!!

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Metro Vancouver Townhouse and Condo Prices are Falling

Metro Vancouver condo prices skyrocketed to a peak in June of 2018. The good news for first-time home buyers is that since then prices dropped significantly. We expect price reductions to accelerate in the slow winter months. Today, the benchmark Metro Vancouver condo is almost affordable without help from the bank of mom and dad.

Similar to houses, at the moment the lower priced condos are finding willing buyers while the expensive ones are sitting untouched. Eventually the nicer/larger (i.e., 2 nd 3 bedroom) condos will drop in price and this will shift the prices downward for more modest condos.

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Metro Vancouver townhouse prices are headed in the same direction as condos. Since house prices have dropped further than townhouse prices, the gap between the two has narrowed. For townhouse owners seeking to upgrade to a full house, this could be a great opportunity.

Still a challenge for first-time home buyers

Although Vancouver home prices have dropped significantly they are still not very affordable. To put this into perspective, a first-time home buyer household earning $75,000 (the median Metro Vancouver household before tax income) can only get a $320,000 mortgage. This makes it painfully obvious that to buy an entry level $650,000 condo, a first-time home buyer needs to save a $330,000 cash down payment or receive a very generous gift from mom and dad. For most people, that’s just not on the cards.

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2019 Metro Vancouver House Price Forecast

At the beginning of 2019, RE/MAX optimistically predicted house prices in Metro Vancouver would drop only 3% while Central 1 (the Economists supporting Credit unions) predicted a drop of 7%. So far this year house prices have dropped 3.25% and with three shoulder season months remaining, we expect price declines to accelerate into Winter. Over the past 3 years, West Vancouver house prices have shed 25% of their value while Westside Houses have dropped 20%. As these expensive markets drop, the surrounding areas will compress too. A benchmark Squamish house is now valued under $1 million and New Westminster has dropped to within a hair of $1 million.

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Given the forecasts, the current market weakness, and the increased downward price pressure, prices will likely remain flat or drop for the next few months. As well, homebuyers and homeowners shouldn’t expect much price appreciation between now and the end of 2020.

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2. What are Purchase and Listing Trends?

Trending Toward Buyer’s Advantage

What does this mean exactly? Well, the market for all homes (detached, townhome, condo) are all trending toward a position where buyers have more power than sellers. This means buyers can leverage the weaker market 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 territory though. While the condo market is trending towards a buyer’s advantage, it’s currently in a balanced market. Take note that as supply has increased, Vancouver home prices have dropped. This means that the current Vancouver condo prices may be unsustainable in a healthy balanced market. So, if new construction completions later this year 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!

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Fewer buyers – No longer a foreign investment hot spot

2019 has been a slow year for home purchases, which is certainly not something we’re used to seeing. Richmond, the Vancouver Westside, and West Vancouver have seen the most dramatic falls in purchase and sales. Our research suggests that foreign buyers are moving on to other cities and countries. Scanning news outlets across Canada and reviewing realtor marketing materials, it becomes clear that any foreign money still coming to Canada seems to be directed toward Toronto, Ottawa and Montreal.

The industry has been celebrating increased buyer interest in the past few months (i.e., more homes are being bought) and although the past 3 months have outperformed 2018, last year was considered a terrible year and better than a terrible year sounds less impressive. As well, 2019 year-to-date has seen fewer home purchases than 2018.

The number Metro Vancouver houses listed for sale has been trending a little higher than past years. These trends of lower demand and higher supply explain the reductions in home prices.

In contrast, the number of Vancouver condo and townhouse purchases (sales) started 2019 far lower compared to previous years and they have dramatically higher numbers of homes for sale. Basic economic theory tells us that we can expect this to lead to condo and townhouse price reductions.

A decrease in pre-sales reflects a more disciplined market

Pre-sales, which are purchases of brand-new homes from developers, have trended down substantially. Since developers need to sell at least 70% of a project to secure financing and begin construction, they are trying to entice buyers with price discounts, move-in allowances, and cool amenities. Some developers have offered up to a $100,000 bonus to the buyer realtor who can convince their client to buy!

According to MLA advisory, the current pre-sale activity levels “reflect a more normalized pace of sales for the Lower Mainland.”

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Causes of the slowdown

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.


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3. Should Investors Sell?

From a seller’s perspective, now is a better time to sell than in two years as CMHC, a Government of Canada Agency predicts that house prices will be flat or drop for the next two years.

To benefit from the best-case scenario, a home buyer should talk to their mortgage broker about prioritizing flexible loan conditions and mitigating risk. Find out more about the benefits of a mortgage broker.

Potential for a highly supplied market

There’s potential for an overwhelming surge in supply and this would bring more downward pressure on prices.

41,000 homes were under construction in Metro Vancouver (12,000 in the City of Vancouver) in February 2019, which are due to complete in 2019 and 2020. If a significant number of those homes were pre-purchased with the intention to flip them, they could bring a ton of supply to the market.


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4. Is this a good time to buy?

With buyer negotiating power and dropping prices, 2019 will be a good time to buy. However, 2020 may be even better.

If you are thinking of buying just be sure to drive a hard bargain, and cover your bases with smart and educated decisions. Don’t bite off more than you can chew.

Buying a home is a big decision, so check out Mortgage Sandbox’s Canadian Home Buyer Guide so we can walk you through the end-to-end process and get you ready to buy your new home!


Where will mortgage rates be by 2021?