Metro Vancouver's housing slowdown to continue into 2023: forecast

Metro Vancouver's housing market slowdown to continue into 2023: forecast

Towers in the Brentwood area of Burnaby. (Alex533/Shutterstock)

The housing slowdown in Metro Vancouver that first began in the second quarter of 2022 is expected to continue through 2023.

Based on the Real Estate Board of Greater Vancouver’s (REBGV) 2023 housing market forecast released today, the total number of home sales this year will be consistent with the totals of the previous year.

The total number of home sales in 2023 is expected to reach 28,500 — 2.6% lower than the 29,261 units sold in 2022. This includes 14,500 apartment units (down 7% from 15,592 units in 2022), 5,000 townhouse units (up 0.3% from 4,985 units in 2022), and 8,750 single-family detached units (up 4.3% from 8,392 units in 2022).

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Average home price increases will be relatively mild this year compared to the significant gains earlier in the pandemic. Overall prices for all housing types are expected to increase by 1.4% year-over-year to $1.2 million in 2023, with apartments up by 1.1% to $775,000, townhouses up by 2.1% to $1.185 million, and single-family detached homes up by 2% to $2.025 million.

Two key factors that could affect these projections are the risks of an economic recession, economic stagnation, and even higher mortgage rates. Earlier this month, the Bank of Canada made its eighth consecutive interest rate hike in the current escalation cycle, increasing its rate by 0.25% to 4.5%, which surprised some economists who had expected the rate would be put on hold after December’s increase.

REBGV notes home prices in Metro Vancouver have historically been relatively immune to the impacts of the Bank of Canada’s interest rate tightening cycles and the resulting mortgage rate hikes. The last major significant price correction in Metro Vancouver occurred during the tightening cycle of the early 1980s.

In the current tightening cycle, home prices in this region have fallen about 10%, and there are already signs the pace of decline is starting to show signs of slowing.

“A key factor that has underpinned prices in the region over the last 40 years has been the steady population increase in Metro Vancouver and surrounding areas,” reads the forecast.

“Despite the well-publicized challenges of housing affordability in this region, the amount of people who continue choosing to reside here represent an important source of demand pressure that continues to push up against a supply of homes that remains scarce, in relative terms.”

The federal government’s higher immigration targets over the coming years will also continue to fuel demand and home prices in Metro Vancouver.

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