Pre-COVID home sales in Vancouver not expected to rebound until 2025
Home sales in Vancouver are expected to recover this year, but a new report anticipates it will take until 2025 for it to rebound to the pre-COVID level.
The Canada Mortgage and Housing Corporation (CMHC) released its latest Housing Market Outlook (HMO) report Thursday morning.
The findings suggest it will be a difficult road ahead for potential home buyers as the high price tag make it out of reach.
This is because of the “historically low” number of property listings to meet the demand of a growing population.
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CMHC says some homeowners who are experiencing changes in their life may sell their homes, but “patient sellers will wait for prices to resume growth before listing.”
As millennials get older and reach an age where they more often consider home ownership, CMHC says, “We might expect more buyers, but many will not be able to afford to buy.”
“Higher mortgage rates mean buyers will qualify for smaller loans. Currently, loan sizes have fallen back to where they were in 2019, while prices for apartments remain 15% above 2019 levels,” the report reads.
CMHC
To compensate, CMHC suggests people will need to make larger down payments.
“This will be too much of a hurdle for many in 2023. Over the forecast horizon, income growth will gradually lift buying power, leading to rising sales,” CMHC added.
“Higher growth in wages could bring buyers closer to being able to afford prices, leading to sales on the higher end of the forecast range. On the other hand, a recession could lead to falling wages and fewer sales if interest rates remain at the current level.”
Meanwhile, those with a smaller budget will focus on the apartment market, which CMHC says will cause average prices to fall this year.
In 2023, single-family home sales will drop by less than half compared to pre-COVID levels. In contrast, apartment sales will decline to about 75% of pre-COVID levels. As the year progresses, both will begin to recover.
CMHC
Additionally, homes are just not being built fast enough to meet the housing demands of the aging millennials and the flow of migrants.
“Even though Vancouver’s purpose-built rental market is on track to deliver a record number of new units, the scale falls well below population growth,” CMHC said.
This year, construction for new homes is expected to decrease, which will impact the years to come.
Meanwhile, there isn’t great news for renters either.
CMHC said the average two-bedroom space is expected to increase for three reasons:
- Units with existing tenants (or “non-turnover units”), which are protected by provincially mandated maximum rent increases.
- Turnover units, which will be leased at prevailing market rents (currently sitting about 20% higher than non-turnover rents).
- Newly completed units, which typically rent at a premium over existing units.