In a matter of weeks, the effects of COVID-19 have dramatically shifted our lifestyles, relationships, and the global economy. Unfortunately, the real estate market—which made up 17.4% of B.C.’s GDP in 2018—has not proven immune to the impact. Despite the public health crisis, though, Vancouver still reigns as Canada’s most expensive city. In our latest Metro Vancouver Housing Update, we reported a benchmark detached home carries the price of $1,462,100 and an average condo price of $685,000.
However, there may be a unique set of challenges facing the Vancouver housing market during—and after—COVID-19. While there are still many uncertainties about how the virus will continue to affect British Columbia residents, many of the takeaways from recent news may help elucidate the future of real estate in Vancouver.
Here’s what we know.
Foreign investment is down.
A critical factor in Vancouver’s cost of living is the extent to which foreign buyers invest in local real estate. With national and international borders closed in response to COVID-19, real estate agents within Metro Vancouver have noted a substantial decrease in the number of foreign buyers.
Moreover, the restrictions being imposed by the Chinese government in response to the virus are having a considerable impact on their economy, which in turn affects the greater Vancouver real estate market.
However, it remains unclear whether the drop in demand from foreign buyers will be enough to make lasting changes in the value of Vancouver’s real estate.
Mortgage rates are low.
Recently, the Bank of Canada has stimulated the housing market by cutting mortgage rates down to 0.25%. This low rate has made it easier for Canadians to access mortgages. There has not been a subsequent rise in housing supply, though, which would be necessary for interested homebuyers to take advantage of low prices. Many people are choosing not to buy right now, and many aren’t listing either. This scenario ultimately benefits those who can leave their listings up, and agents are receiving a flurry of offers for these available listings, with an exceptionally fast turnaround.
While a rate decrease and quick turnaround time may sound promising for those looking to get a foothold in the market or level up their investments, it may exacerbate Vancouver’s affordability issue.
An issue of supply and demand
COVID-19’s impact on Vancouver’s housing market may come down to supply and demand.
As countries like China recover from their shutdowns and restart their economies, they will likely look to invest their real estate dollars in Vancouver again. Additionally, potential Canadian buyers can now increase the amount they can to borrow, which may prompt more people to get into the market and decrease overall supply.
Despite a modest 1% growth in BC’s average home prices projected for 2020, as more foreign investors and Canadian citizens look to invest in Vancouver real estate, home prices should hold steady or even increase.