A number of variables -- and wild cards -- are set to affect the 2022 housing market. As you know, I'm always a bit hesitant to put much value on predictions, and have often quoted the phrase "predictions are difficult, particularly about the future." The Real Estate Board of Vancouver's chief economist Keith Stewart recently shared his 2022 housing and economic predictions. While Keith is cautious to make firm predictions as well, he did lay out some interesting information, noted below. I've interspersed a few notes of my own as well.
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On the current historic low supply of homes for sale: "Right now there is basically no inventory, with some markets hilariously under-supplied." "We currently have about the same number of active listings in Metro Vancouver as we had 30 years ago, when the population was roughly one million less than now." You may recall my note in my last e-news about the significant percentage of homes on market that can not really be viewed as "for sale", due to unrealistic asking prices. Remove these unrealistic listings, and supply is actually much tighter than Keith describes here.
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"With a product that everyone wants to buy, and everyone who already owns wants to hold on to, prices will inevitably go up." And with 2022 starting with such low inventory, a further run-up in prices for a few months is likely. This run-up could weaken as we move into the later spring, as interest rates and qualification requirements rise, and more inventory comes to market. Demand may soften with these rising rates and requirements, which may result in a build-up of more listing inventory. This could further soften activity in a bit of a feedback loop.
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Employment rates for the prime homebuyer 25-54 age group have steadily risen to near pre-pandemic levels over the past year. This steady recovery has been reflected in high sales volumes and price increases. There is speculation that many in this age group have already done their deals, which could lead to slower 2022 activity. As Keith mentioned, at this point the driver for another large and sustained price jump may only come with actual economic growth and/or a future interest rate drop. The potential for continued high immigration numbers bumping up demand can’t be overlooked however.
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Not touched on by Keith is the sales numbers related to buyers who will live in the home they buy vs. those who will hold for speculation and/or rental purposes. A recent article in Better Dwelling based on StatsCanada data noted that investors of all types own some 24% of all homes in the Metro Vancouver area, but some 44% of homes built since 2016. Investors are taking up a large supply of the new homes built in Metro Vancouver.
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We've heard much talk about cooling the market, etc. Keith feels much of this talk is bureaucratic trial balloons, rather than firm political plans. He feels that any substantial policy changes would focus first on housing bought for investment purposes. This may include, for example, increased down payment requirements for investors and /or increased capital gains tax rates. Keith does not expect the current stress test to become more stringent this year for owner-occupiers.
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"With rising interest rates and ever higher prices, there are indications that we may be reaching max affordability in some areas now." For the seventy or so Metro Vancouver sub-areas, CMHC data indicate a median after-tax household income ranging from $40,000 or so to a high of approximately $80,000. Two or three areas have a median household income after-tax of just over $100,000 and two or three areas closer to $20,000, but these are outliers. Consider these stats in relation to Metro Van's December 2021 benchmark housing prices: Detached homes – $1,910,200, Townhomes – $1,004,900; Condos – $761,800.
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"House prices are tethered to the economic resources of those people looking to buy." This is absolutely true; however, in the Vancouver area we know that those resources are often globally derived and much more robust than much of the locally created resources.
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For all property types and areas, Metro Vancouver housing prices rose 8.9% in 2021. Did you know some Canadian real estate markets rose at 3 times the pace of Metro Vancouver's? Moncton, New Brunswick, for example.
So there you have it. And of course we see many other variables at play both here and around the world that could influence the Metro Vancouver real estate market. Predictions are difficult, particularly about the future!
Welcome to 2022! If I can be of some help with your real estate thoughts and plans, please do get in touch. And if you know of anyone else thinking of making a move this year, please do consider connecting us.