Greater Vancouver real estate prices barely corrected, but they’re already back to climbing. Real Estate Board of Greater Vancouver (REBGV) data shows the price of a composite benchmark home climbed in March. It was actually a huge jump in price, but at least one of the Big Six banks sees it being just a blip, failing to spark a new buying wave. Good luck telling that to Canada’s exuberant home buyer’s though, who are now convinced that economic slowdowns mean higher home prices. The moral hazard is real.
Greater Vancouver Real Estate Prices Surged Higher Last Month
After a brief correction, Greater Vancouver home prices are full-steam ahead. The REBGV benchmark, or typical, home price climbed 1.8% (+$21.0k) to $1.144 million in March. For context, the Bank of Canada (BoC) target for annual inflation growth is 2 points, which home prices did in just one month.
Greater Vancouver Real Estate Prices Have Changed Direction
The composite benchmark price of a home across Greater Vancouver.
Source: REBGV; Better Dwelling.
Annual growth didn’t quite reflect the growth due to a base effect. Prices are 9.5% (-$120k) lower compared to last year—a larger percent decline in contrast to February. Due to prices climbing even faster in March 2022, the huge increase seen last month registered as a further slowdown. A five-digit price increase over a few weeks isn’t exactly what most people think of when they see a slowdown in annual growth.
Greater Vancouver Real Estate Price Growth Still Shows Deceleration
The 12-month percent change for the composite benchmark price of a home across Greater Vancouver.
Source: REBGV; Better Dwelling.
Vancouver Home Sales Are Climbing Higher
Greater Vancouver home sales are slow, but there are some signs of market stabilization. Unadjusted home sales fell to 2,535 units in March, a drop of 42.5% compared to last year. Volumes remain suppressed from typical levels.
However, an analysis from National Bank of Canada (NBF) notes some seasonally adjusted strength. March sales climbed 4.0%, following a 15.1% increase in February.
“Despite these early signs that the Vancouver real estate market is stabilizing, the level of sales remains well below its historical average, having declined by 49.7% from their last peak in January 2022,” explains Daren King, a prominent economist at NBF.
His numbers show year-to-date (YTD) sales are still very weak. Over the past 20 years, the volumes have only been lower twice—in 2019, and 2009. The increased volume looks like pushed forward demand, and King doesn’t see it as a new trend direction.
“… the outlook for a recovery in the housing market remains limited as we expect the Bank of Canada to keep its policy rate at the current restrictive level for most of 2023. As a result, sales are expected to remain below their historical average in the coming months,” he explains.
Seasonally adjusted inventory at month-end remained stable, rising just 0.4% in March. Flat inventory and higher sales results in a tighter market, helping to explain some of the returned exuberance.
“Still, market conditions remained looser than average,” argues King.
NBF, amongst other banks, remain convinced the BOC won’t be cutting rates this year. Despite this, that’s not quite the read that retail buyer’s likely took away from a slowing economy and bank liquidity crisis. Many have embraced the moral hazard, and believe that a slowing economy will result in looser financial conditions, sending home prices higher.
As odd as this may seem, it’s worth noting that Toronto has also seen a similar sized increase with falling home sales. A sudden change in two markets that aren’t all that connected tends to result from one of two things—supply constraints or credit.
Either both markets suddenly saw a similar shift in relative supply and demand, or a credit expansion helped to absorb higher prices. Since the former didn’t happen, this is most likely a combination of exuberance and easing credit.