Metro Vancouver housing market is still "treading water"

A row of Vancouver Special homes in East Vancouver. (Kenneth Chan/Daily Hive)

“The Vancouver housing market has been treading water as of late — activity is lower than the 10-year average, but is not at a total standstill,” said Randy Ryalls, general manager of Royal LePage Sterling Realty.

A market update by Royal Lepage today states the Bank of Canada’s first cut to the policy interest rate in June 2024 did not lead to a noticeable increase in home transactions, suggesting that more cuts to the policy interest rate and improved economic conditions may be needed before there is a materially greater number of homebuyers.

“We continue to see consumers sitting on the fence, taking their time with their real estate purchase decisions. Inventory has continued to grow, giving prospective buyers some much-needed choice and keeping market conditions balanced. As is normally the case for this time of year, buyers and sellers have hit pause to enjoy the summer months,” said Ryalls.

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For similar reasons, many developers are delaying their new project launches, holding back the start of their pre-sales. This is also due to the current high borrowing costs for construction financing, and inflating costs for construction labour, materials, and equipment. Data from Canada Mortgage and Housing Corporation (CMHC) also shows housing starts have declined recently.

Combined, these issues are “making it difficult for builders to break even on new housing developments” in Metro Vancouver, according to Ryalls.

Royal Lepage’s surveys from earlier this year suggest only 10% of potential homebuyers nationwide would be motivated by a “tiny” drop in the policy interest rate.

The Bank of Canada’s next policy interest update and monetary policy report is scheduled for July 24, 2024.

Following the 0.25% cut to the policy interest rate in June 2024, the rate now stands at 4.75%. Other analysis performed earlier this year suggested it could take until the end of 2024 for the rate to further drop to 4.25%, and up to several years for the rate to gradually decrease from its previous peak of 5% to the “neutral position” of 2.25%.

“In the months ahead, I expect we will see a typical sleepy summer market. If inventory levels continue to rise at the rate we’ve been seeing, those who are under tight pressure to sell may need to consider lowering their list price in order to attract buyer attention,” said Ryalls.

“Even if the Bank of Canada makes another rate cut in July, it’s unclear if it will stimulate buyer demand. It would take a much more profound decrease to interest rates to reverse the trends we are currently experiencing.”

As of the end of the second quarter of 2024, according to Royal Lepage, the aggregate price of a home in Metro Vancouver increased by 3.9% to $1.25 million compared to the same quarter in 2023. This is also a 1% increase compared to the first quarter of 2024.

The median price of a single-family detached house in Metro Vancouver went up by 2.6% year over year to $1.78 million, while the median price of a condominium increased by 1% to $777,000 over the same period.

Within the city of Vancouver, the aggregate price of a home increased by 0.3% year-over-year to $1.439 million in the second quarter of 2024, with median price increases of 4.6% to $2.294 million for single-family detached houses and 3.7% to $852,000 for condominiums.

By the end of 2024, home prices in Metro Vancouver are expected to see a 5.5% increase compared to late 2023.

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