The Vancouver real estate market has already been feeling the impact of the coronavirus pandemic. Real estate numbers for April show that housing inventory and sales activity in Greater Vancouver decreased by 34% and 39%, respectively.
With buyers being wary of moving during a pandemic and sellers concerned about opening their homes for viewings, prices in the region have plateaued. This caused significant drops in both supply and demand.
Despite the effects of the pandemic, the market seems to be balanced overall. It’s still a sellers’ market for condos under $700,000 and detached homes around $1.6 million, with bidding wars still occurring for these property types. The market for more expensive homes, however, appears to be favouring buyers.
While there hasn’t been a lot of panic or forced selling, change could come in the fall for Vancouver real estate. Two variables that can shed some light when trying to forecast where the market is headed are post-COVID-19 employment statistics, and new or expanded government programs meant to mitigate the pandemic’s economic effects.
The Employment Variable
A low unemployment rate indicates that the economy is functioning well, which is great for real estate. Strong economies increase demand for housing by attracting foreigners, businesses, international students, temporary workers and new investments, which results in higher house prices.
Not surprisingly, the opposite is true for a weak economy. If people don’t think they can find a job in Vancouver, they won’t move to the area. Additionally, those who have recently been laid off and now have fewer ties to the city will likely leave.
Data from Moody’s Analytics shows that home prices usually decrease by about 4% for every 1% increase in unemployment. Using this ratio, home values in Vancouver would drop by about 20% if the city’s unemployment rate were to double from pre-pandemic levels.
Moody’s Analytics’ recent Canada Housing Market Outlook report notes that:
“The worst effects of the COVID-19 pandemic will be felt in regions that rely disproportionately on the leisure/hospitality, trade and energy industries.”
Vancouver, and British Columbia, in general, are therefore more vulnerable due to their largely leisure/hospitality and trade-based economies, the report states.
The Government Variable
Home prices are not decreasing right now because of government assistance as well, according to CBC. Multiple levels of government have implemented several temporary programs to help top up or replace income for Canadians whose lives have been affected by the pandemic.
These programs have also ensured that some expenses, such as mortgage payments, utility bills, and taxes, can be deferred. For distressed homeowners, this has helped buy them some time, so there is less pressure to sell their homes.
Once the temporary government programs disappear, however, homeowners who are less prepared or more vulnerable may be forced to sell anyway. This is likely to happen during summer and fall, possibly resulting in a spike in new listings, which would be great for buyers but not as great for sellers.
Those who had plans to sell their home in 2020 or early 2021 might want to consider listing their home sooner rather than later. A 20% drop in value over the short-term isn’t for sure, but it’s also not impossible, CBC reports.
On the other hand, should prices decrease, prospective buyers might want to snap up properties while they have the chance. In this case, the B.C. government might launch subsequent programs to prevent prices from dipping too low and destabilizing the market. So, home values may increase again afterward.
Is it a good time to buy or to sell Vancouver homes given the pandemic? Buyers and sellers should pay close attention to how the market is shifting. For some, it may just be the right move.