The British Columbia real estate market is showing surprising resilience in 2023, despite rising interest rates and affordability challenges. Home sales across Metro Vancouver and other parts of the province are down from last year’s frenzied pace, but holding up better than expected. As mortgage rates continue climbing, activity will likely cool further in the coming months. However, some experts see signs the market may be nearing a bottom. Here’s a look at the key factors shaping BC’s housing market this year and what may be in store for 2024.
Why the Market Has Held Up Well So Far
While home sales in BC are down about 5% year-over-year, prices have only dipped slightly from their peak last spring. This resiliency stems from a few key factors:
- Persistent supply shortage. BC has faced a chronic lack of housing supply over the past decade, which continues to put upward pressure on prices. There’s just not enough homes for sale to meet demand.
- Strong economy and demographics. BC has a fast-growing population and a robust job market, fueling housing demand. High immigration and rising millennials looking to buy homes are key drivers.
- Fixed mortgages insulate many buyers. Roughly 75% of Canadian home loans have fixed rates, limiting the impact of rising variable rates so far.
Headwinds Growing as Rates Keep Climbing
The Bank of Canada has hiked its benchmark rate rapidly from 0.25% at the start of 2022 to 5% now. mortgage rates have followed suit, with 5-year fixed mortgages topping 5% this fall for the first time since 2008.
This surge in borrowing costs has cooled demand and will further dampen sales activity into 2023. Affordability has worsened dramatically in the past year, especially for first-time homebuyers. Higher rates also curb prices over time.
As fixed mortgages come up for renewal at higher rates in 2023-24, more existing homeowners may also feel pressured to sell.
For now, the market is in an adjustment phase. Sales have dropped but remain decent as many buyers lock in fixed rates in anticipation of further hikes. The full impact likely won’t be felt until mid-2023.
What Could 2024 Bring for BC Housing?
Forecasting the housing market is challenging amid all the variables. But here are a few potential scenarios for BC in 2024 based on interest rate moves:
- More hikes, deeper slowdown. If the BoC keeps aggressively raising rates through 2023, home sales could slump further and prices decline 5% or more.
- Rate cuts, rebound. If inflation eases significantly, the BoC may start cutting rates in late 2023, sparking a housing rebound by end of 2024.
- Status quo, stability. Rates remain elevated around 4-5%, housing cools but no sharp price declines as supply limits correction.
Much depends on the course of inflation and how proactively the Bank of Canada moves on rates. Other factors like employment, migration trends, and housing supply will also shape the market’s path.
- BC housing has shown surprising resilience so far in 2023 but headwinds are growing.
- As fixed mortgages expire, higher borrowing costs will dampen sales further.
- But constrained supply and solid fundamentals provide a floor for home prices.
- The market could stabilize by late 2023, before rebounding in 2024 if rates fall.
While the correction will likely deepen, dramatic plunges seem unlikely given fundamentals. But the extreme price gains of 2020-2022 are over. The BC housing market faces a bumpy road ahead, but should return to balance by 2024-25.
Q: What is the outlook for the 2023 BC housing market according to BCREA?
A: The British Columbia Real Estate Association (BCREA) predicts that, given the state of housing supply across the province, the market has been more resilient than expected in 2023. Despite high demand and tight inventory, average home prices are expected to see a modest hike.
Q: Will the BC real estate market performance differ from the rest of the housing markets across Canada?
A: The BCREA expects the BC real estate market to outperform the rest of Canada. The market is showing signs of resilience given the state of housing supply, and home prices are expected to increase despite factors like tightening mortgage restrictions and slowing activity as mortgage rates climb.
Q: How is the housing market in Greater Vancouver faring as of 2023?
A: As per the Real Estate Board of Greater Vancouver, sales in Metro Vancouver are robust but showing signs of slowing down. However, the average home price in Greater Vancouver is expected to continue its upward trend, supported by strong demand and limited supply.
Q: What are the factors influencing home prices in British Columbia for 2023?
A: According to BCREA’s chief economist, Brendon Ogmundson, factors influencing home prices include the Bank of Canada rate increases which are slowing activity as mortgage rates climb to their highest, lack of sufficient housing supply, and robust demand. These factors are expected to lead to a moderate rise in average home prices.
Q: Can we expect a significant hike in the average home prices in Surrey in the next 5 years?
A: Yes, Surrey, being one of the fast-growing markets in British Columbia, will likely see an uptick in average home prices in 2023. The limited supply of available units, coupled with increasing demand, is anticipated to drive the average home prices higher.
Q: How is the residential sales activity predicted to be in 2023 in BC?
A: BCREA forecasts the residential sales activity to be more resilient than expected in 2023. Despite high demand and tight inventory, unit sales are expected to stay resilient with a hike in average home price expected across the province.
Q: When will the hike in home prices perhaps start slowing down?
A: The predicted slowdown in home prices might commence by the end of 2024 or even mid-2025, as per BCREA. The assessment is based on the expected tightening of the Bank of Canada rate, which could eventually lead to slowing activity as mortgage rates climb.
Q: What is the consensus on the 2023 BC real estate market among economists?
A: According to Brendon Ogmundson, the chief economist at BCREA, the BC real estate market has been more resilient in 2023 than initially expected. This resilience is due to high demand, and a relatively tight supply that is pushing average home prices higher.