Market Update

OCTOBER 2022 METRO VANCOUVER HOUSING MARKET HIGHLIGHTS

Inflation, Interest Rates Create Caution in Metro Vancouver’s Housing Market

Home sale activity across the Metro Vancouver housing market continued to trend well below historical averages in October.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 1,903 in October 2022, a 45.5 per cent decrease from the 3,494 sales recorded in October 2021, and a 12.8 percent increase from the 1,687 homes sold in September 2022.

Last month’s sales were 33.3 per cent below the 10-year October sales average.

Source: REBGV

“Inflation and rising interest rates continue to dominate headlines, leading many buyers and sellers to assess how these factors impact their housing options,” Andrew Lis, REBGV’s director, economics and data analytics said. “With sales remaining near historic lows, the number of active listings continues to inch upward, causing home prices to recede from the record highs set in the spring of 2022.”

There were 4,033 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in October 2022.

This represents a 0.4 per cent decrease compared to the 4,049 homes listed in October 2021 and a 4.6 per cent decrease compared to September 2022 when 4,229 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 9,852, a 22.6 per cent increase compared to October 2021 (8,034) and a 1.2 per cent decrease compared to September 2022 (9,971).

“Recent years have been characterized by a frenetic pace of sales amplified by scarce listings on the market to choose from. Today’s market cycle is a marked departure, with a slower pace of sales and more selection to choose from,” Lis said. “This environment provides buyers and sellers more time to conduct home inspections, strata minute reviews, and other due diligence. With the possibly of yet another rate hike by the Bank of Canada this December, it has become even more important to secure financing as early in the process as possible.”

For all property types, the sales-to-active listings ratio for October 2022 is 19.3 per cent.

By property type, the ratio is 14.3 per cent for detached homes, 21.6 per cent for townhomes, and 23.2 per cent for apartments.

Source: REBGV

Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,148,900.

This represents a 2.1 per cent increase from October 2021, a 9.2 per cent decrease over the last six months, and a 0.6 per cent decrease compared to September 2022.

Sales of detached homes in October 2022 reached 575, a 47.2 per cent decrease from the 1,090 detached sales recorded in October 2021.

The benchmark price for detached properties is $1,892,100. This represents a 1.6 per cent increase from October 2021 and a 0.7 per cent decrease compared to September 2022.

Sales of apartment homes reached 995 in October 2022, a 44.8 per cent decrease compared to the 1,801 sales in October 2021.

The benchmark price of an apartment property is $727,100. This represents a 5.1 per cent increase from October 2021 and a 0.2 per cent decrease compared to September 2022.

Attached home sales in October 2022 totalled 333, a 44.8 per cent decrease compared to the 603 sales in October 2021.

The benchmark price of an attached unit is $1,043,600. This represents a 7.1 per cent increase from October 2021 and a 0.5 per cent decrease compared to September 2022.

CLICK HERE – Full REBGV October 2022 Market Update

Vancouver BC – November 2, 2022

Have a look at the REBGV October 2022 Market Update Insights!

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The Bank of Canada Raises Policy Interest Rates by 50 Basis Points and Continues to Tighten Quantitatively

The Bank of Canada today increased its target for the overnight rate to 3¾%, with the Bank Rate at 4% and the deposit rate at 3¾%. The Bank is also continuing its policy of quantitative tightening.

Source: Bank of Canada

Inflation around the world remains high and broadly based. This reflects the strength of the global recovery from the pandemic, a series of global supply disruptions, and elevated commodity prices, particularly for energy, which have been pushed up by Russia’s attack on Ukraine.

The strength of the US dollar is adding to inflationary pressures in many countries. Tighter monetary policies aimed at controlling inflation are weighing on economic activity around the world. As economies slow and supply disruptions ease, global inflation is expected to come down.

In the United States, labour markets remain very tight even as restrictive financial conditions are slowing economic activity.

The Bank projects no growth in the US economy through most of next year. In the euro area, the economy is forecast to contract in the quarters ahead, largely due to acute energy shortages. China’s economy appears to have picked up after the recent round of pandemic lockdowns, although ongoing challenges related to its property market will continue to weigh on growth.

Overall, the Bank projects that global growth will slow from 3% in 2022 to about 1½% in 2023, and then pick back up to roughly 2½% in 2024. This is a slower pace of growth than was projected in the Bank’s July Monetary Policy Report (MPR).

In Canada, the economy continues to operate in excess demand and labour markets remain tight. The demand for goods and services is still running ahead of the economy’s ability to supply them, putting upward pressure on domestic inflation. Businesses continue to report widespread labour shortages and, with the full reopening of the economy, strong demand has led to a sharp rise in the price of services.

The effects of recent policy rate increases by the Bank are becoming evident in interest-sensitive areas of the economy: housing activity has retreated sharply, and spending by households and businesses is softening.

Also, the slowdown in international demand is beginning to weigh on exports. Economic growth is expected to stall through the end of this year and the first half of next year as the effects of higher interest rates spread through the economy. The Bank projects GDP growth will slow from 3¼% this year to just under 1% next year and 2% in 2024.

In the last three months, CPI inflation has declined from 8.1% to 6.9%, primarily due to a fall in gasoline prices. However, price pressures remain broadly based, with two-thirds of CPI components increasing more than 5% over the past year. The Bank’s preferred measures of core inflation are not yet showing meaningful evidence that underlying price pressures are easing. Near-term inflation expectations remain high, increasing the risk that elevated inflation becomes entrenched.

The Bank expects CPI inflation to ease as higher interest rates help rebalance demand and supply, price pressures from global supply disruptions fade, and the past effects of higher commodity prices dissipate. CPI inflation is projected to move down to about 3% by the end of 2023, and then return to the 2% target by the end of 2024.

Source: Bank of Canada

Given elevated inflation and inflation expectations, as well as ongoing demand pressures in the economy, the Governing Council expects that the policy interest rate will need to rise further. Future rate increases will be influenced by our assessments of how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding. Quantitative tightening is complementing increases in the policy rate. We are resolute in our commitment to restore price stability for Canadians and will continue to take action as required to achieve the 2% inflation target.

Information note

The next scheduled date for announcing the overnight rate target is December 7, 2022. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on January 25, 2023.

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