The waiting game continues but some sellers are becoming impatient.
The waiting game in the Metro Vancouver housing market continues but more sellers are joining in and some are becoming impatient. One month a trend does not make. But we certainly saw more listings come on the market in Metro Vancouver in September – more so in the first half. As September moved on through the second half of September, fewer listings came on than in the first half and perhaps this was a cloud burst of new listings and not a constant shower. Much like the rain in September that came in fits and starts, while we have more inventory, it’s still far short of what’s needed.
The wild card is the direction of interest rates and, to an extent, that of the provincial economy. In any case, the pot on the table is getting larger as September saw 5,564 new listings pushed into play, the highest number since May 2023 and nearly 30% higher than in September 2022. Meanwhile, 1,926 properties were sold this September, almost as low as September of 2022, with just 1,701 transactions last year. Today, with 11,382 active listings in Greater Vancouver and another 6,532 in the Fraser Valley – and the sales-to-listing ratio falling – we believe some sellers will tire of waiting. The question is just how many.
We can expect some asking prices to come down, especially in the detached-house sector. Arguably this has already happened.
Let’s look at the environment through a potential detached house seller’s lens. The unpopular Bank of Canada shouldn’t raise interest rates again at its October sitting. I doubt even the Governor of the BOC knows for sure what to do. Let’s hope they don’t fall for the increase in jobs reported today in Canada and base a rate increase on that number. The B.C. Finance Minister just released an economic outlook that forecasts provincial GDP growth shrinking to 0.4 percent next year. Consumer confidence is fragile. If the rate does increase, even by a modest 0.25 percent as it did in August, it would further drag down detached house sales that are already lagging. In September, the sales-to-active listing ratio for detached houses in Greater Vancouver fell to 12.6%, signalling a buyer’s market. The benchmark detached house price fell 0.1% from a month earlier and it hasn’t budged in three months.
Those eager to sell a detached house may decide to drop their asking price now because the demand for homes benchmarked at more than $2 million will shrink even further. On the bellwether Westside of Vancouver, for example, the average sale price of a detached house was $403,000 lower in September than in January 2023. This doesn’t mean prices fell by that much, but that the composition of sales was such that more homes for less money sold than in January. With the cost of borrowing, lower price points are more attractive.
Some owners have taken measures to hang onto their houses: 33.3% of Canadian mortgage holders now have amortization periods that exceed 30 years, some surpassing 40 years. A handful can’t hang on.
Buyers, therefore, should continue to search through the expanded listings of detached houses and prepare to be aggressive when making offers. There could be some true bargains out there as owners and investors grapple with higher mortgage rates and flatline prices. Right now, in most detached markets, buyers have the advantage.
For wily investors with deep pockets, the new blanket zoning of Vancouver residential lots for up to six housing units, including strata corporations, could also represent an opportunity. Warning: the city expects to allow only about 150 such applications annually.
However, those hoping that a surge in new home supply, as being pushed by both the province and the federal government, will lead to lower home costs could be disappointed.
In October Metro Vancouver, which represents 21 municipalities, plans to increase development cost charges (DCCs) on new residential construction to pay for water and sewage upgrades. The increases would occur every January over the next three years beginning in 2025. For the City of Vancouver and parts of Burnaby, DCCs on a single-detached home would increase 240 percent from $10,027 to $34,133. Townhomes will also see a significant increase – up 256 percent to $30,861 by 2027. New condo apartment fees will increase 235 percent, to $20,906, during the same period. Depending on the sub-region location, the proposed combined total DCCs rate increases to $24,106 per single-family lot, $22,182 per townhouse unit, and $14,657 per apartment unit. These charges would only apply to market housing, the kind most people want.
Greater Vancouver numbers for September 2023
The composite residential benchmark price hit $1,203,300 in September, which was a 0.4% decrease compared to the $1,208,400 in August, which was a decrease from the $1,210,700 benchmark in July. By property type, the benchmark price is now $2,017,100 for single-detached homes, $1,098,400 for townhouses, and $768,500 for condominiums, with all three representing decreases between 0.1% and 0.5% from August. All sectors are seeing sales increases of between 5.3% and 5.8% when compared to September 2022. Total units sold in September were 1,926, down from 2,296 (16%) in August, down 21% from July 2023 and down 35% in June 2023, but up from 13% compared to September 2022, but 18% lower than in pre-pandemic September 2019. Active Listings were at 11,382 at month-end compared to 10,424 at that time last year and 10,082 at the end of August. New Listings in September were up 38% compared to August 2023. The inventory of total residential listings is up to 6 month’s supply (balanced market conditions) and a sales-to-new-listings ratio of 35% compared to 57% in August 2023 and 39% in September 2022. The sales-to-active listings, though is 13%.
For other regions, contact Berna Yazgan