There is a well worn saying in our business: all real estate is local. And yet, real estate discussions post-pandemic have been dominated by talk of global supply chain issues, national inflation numbers & central bank interest rate hikes. But how are the local markets across Vancouver really doing? This week Dexter Realty’s Co-Owner, Managing Broker & Chief Economist Kevin Skipworth sits down with Adam & Matt to discuss our local markets using metrics that everyone seems to have forgotten lately: inventory levels & sales ratios. The devil, they say, is in the details and we go well beyond the headlines this week to parse where we are today and where we are headed. Listen up!
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Who is Kevin Skipworth?
I am a co-owner, managing broker & chief economist at Dexter Realty. I have a background in economics; I just love numbers and stats. Overtime I developed that love of statistics into a bi-weekly report to get a sense of where the market is at.
How is the Vancouver real estate market right now?
It’s interesting! What’s happening in Vancouver real estate right now is probably not surprising to most people based on current interest rates and inflation. We have an extremely low level of sales compared to where we were but inventory is still low. You would think inventory would creep up and balloon but it’s not happening.
We don’t talk enough about properties that are being organized for land assembly. Those end up on MLS but they’re not meant for resale for end-users. So that’s even less inventory than what the numbers are telling us.
Why is there more inventory in the Fraser Valley than in the core of Vancouver?
Part of it might be a boomerang effect from the pandemic. People who moved out to the Fraser Valley for space may find they don’t like being so far from the city or if they got called back to the office, they don’t like the long commute. There’s also more building happening out there, which leads to more inventory. There’s just more land to build on.
As people begin to shift back to the office, rental prices out in the Fraser Valley may struggle.
Are you surprised by the lack of real estate inventory in Vancouver?
In some ways, yes. We saw during the last slow market of 2018 that there was less inventory than expected, but this time it’s worse. It just shows the strength of the Vancouver real estate market. If sellers can’t get the price they want, they won’t sell. Or if they can’t find somewhere else to go, they can’t sell.
There’s a lot of uncertainty in the world right now so a lot of people are just going to wait and see what happens.
Does this feel like a different moment in Vancouver real estate?
It definitely is a different moment when you look at the inventory. There were less sales in Sep 2018 than Sep 2022, but there were also 1000 less new listings in Sep 2018. We’re not seeing inventory growth at all. We’re already seeing listings tail off for the rest of the year.
It’s also different how this slowdown came about. In 2008, there was a significant shift and it felt like the lights went out. In 2018, you could feel the slowdown coming after the 2016 and 2017 tax changes and stress test. But this time, it came upon us suddenly. We had a strong January and February and now it’s very quiet.
How much of the current real estate slowdown is due to interest rates?
I think rising interest rates are one of the key factors contributing to the real estate slowdown. People have had to adjust their purchasing power. Inflation has also caused people to adjust their budgets.
When you look at 2020 and 2021, we used up a lot of demand. A lot of people bought and sold, took advantage of low rates and got into new markets. Now people are sitting back. They don’t need to buy and they want to know what’s going to happen with rates and prices.
What is going to happen to interest rates in 2023?
Who knows what the government is going to do! We thought the last hike in interest rates might be the last one but perhaps we’ll see more rate hikes. It’s crazy to see where inflation is at – just look at gas prices!
Buyers are starting to adjust to the current rates. We’re seeing more activity around the office. Buyers are getting their feet under them.
I don’t think 2023 will be crazy. I think it will carry on at the same pace. But it will depend largely on what happens with the economy. Will we deal with inflation, accept it, or get pushed into a recession?
Where would you want to sell in the Lower Mainland right now? And what product would sell best?
Townhouses are still a sought after part of the market. A lot of the Lower Mainland doesn’t have townhouse product and that’s what families want.
The market is finicky right now. Look at Coquitlam; they had a very slow September. It’s hard to say what will happen in each submarket.
Port Moody is an area that would be great for sellers. It’s on transit lines and is a hidden gem with a great neighbourhood feel. There are outdoor activities, lakes, cycling and hiking opportunities, etc. And it’s not a huge area. Their current council is struggling with development but I can see people gravitating to Port Moody.
What areas of Vancouver have been consistent through real estate downturns?
Kitsilano always carries through slowdowns. It’s a strong location that people like with not a lot of development. The Broadway Plan may change that. It’s close to beaches and downtown.
Mt. Pleasant and Main Street are other popular areas. It’s tough to get into the east side due to the lack of inventory over the last two years. But we’re starting to see more product come onto the market.
Vancouver in general is very resilient and that’s why we’re not seeing the same price drops as we see out in the Valley. People aren’t as impacted by interest rates in Vancouver.
What are your thoughts on downtown Vancouver real estate?
When covid hit, everyone left downtown Vancouver. So you had more inventory but less desire. The area around Gastown and Roger’s Arena really slowed down. No one wanted to be in that area.
But people are coming back. Events are happening, employees are in the office and people want to be downtown again. It’s still a different environment than the rest of the city though.
Sometimes it feels like there is never a great time to be a buyer in Vancouver, in terms of selection. Do you agree?
I agree. It’s always tough to find good properties in Vancouver. We just never have enough for sale. Even to have a balanced market, we would need 15,000 active listings in the market and I’m not sure if we can get there.
I struggle with the speculative narrative because if Vancouver was a speculative location, you’d see so many more listings and so many more sales. But we don’t. Vancouver is just a desirable place where people want to be.
What do the next 1-3 years look like for Vancouver real estate?
It’s all about supply and demand. Even though it seems like the government has finally figured out that we have a supply issue the question is: Will they solve it and how?
I expect we’ll see a more tempered pace in the real estate market. Without a significant increase in supply, prices will remain steady. It will be a struggle for buyers to get in.
There are always opportunities in markets like this. If you can add conditions and negotiate, take advantage of that. You may not have a lot of places to choose from but you may get the luxury of time. I expect that’s how it will be for the next few years. But our market can change so quickly based on financial markets, interest rates, etc.
I think real estate in Vancouver will be more expensive in five years. I can’t see how it won’t be with our supply challenges and the immigration levels set to come into Canada. Most of the newcomers are coming to Ontario or BC. We do need more workers but housing is the challenge.
Just ahead of the municipal election in BC, do you have any thoughts or predictions?
Promises are easy to make but extremely hard to deliver. Whoever gets elected, as long as they understand the housing supply challenges, that’s what matters. But it’s not just about understanding the problem, it’s about finding a solution. It will be an interesting time for the city. No one seems to have a concrete plan to deal with what Vancouver is facing.
A note on how covid has affected housing:
Covid has made where you live so much more important. For all the people that did move, there were even more that didn’t. People have had to adjust their space, make room for partners or children, work from home, etc. There are so many side effects of the pandemic that we don’t know about yet.
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