Photo: Chris Clogg/Flickr
Greater Vancouver’s housing market is heading towards balance, but limited supply is still a key concern that needs to be tackled, says an economist from one of the Big Six Canadian banks.
Last month, Greater Vancouver’s benchmark home price increased 8.7 per cent year-over-year to $1,019,400, while home resales fell 8.8 per cent from a year ago, according to the Canadian Real Estate Association’s latest data (CREA).
"It still remains more of a supply story than a demand story, and eventually softer demand conditions are likely to feed into hopefully more moderate price growth,” Diana Petramala, a TD Bank economist, tells BuzzBuzzNews.
Last year, in an effort to curb Greater Vancouver’s sky-high home price growth, the provincial government implemented a 15 per cent foreign buyer tax in August 2016.
Following the levy, market activity immediately started to ease for roughly six months. However, home resales and prices started to rebound in early 2017.
With activity falling in line with historical long-term averages, Greater Vancouver home resales dipped by 1.7 per cent in July, the third consecutive month of declines.
“We did see a bit of recovery following through a year-long adjustment in existing home sales. But the market's only recouped about a third of the decline we had seen over the last year. And that recovery has actually started to peter out, particularly in July. Interest rates have started to go up,” says Petramala.
With Greater Vancouver’s sales-to-new listings ratio still above 60 per cent, CREA says the region is still a seller’s market.
Petramala says the ratio is further proof of the concerning supply constraints in the region.
“We haven't really seen a bump to the same degree that we have seen in Toronto in new listings. Even though sales have come down, it still remains fairly tight and that's really what's keeping upward pressure on prices,” says Petramala.
In Victoria, the benchmark home price surged by just under 20 per cent on a year-over-year basis, an increase Petramala attributes to tight supply as well.
With housing starts ramping up over the last year in Greater Vancouver, more homes are expected to hit the market this year and next, which should help bring the market into a more balanced position, says Petramala.
She adds that Greater Vancouver’s market activity right now is not unusual for the region, and when more supply is delivered, prices are expected to moderate in the short-term.
"I think we've seen five housing cycles in Vancouver since 1990 where you get a big run-up in prices, and then they eventually fall. A soft landing in Vancouver can be considered a home price correction of 10 per cent because the market is more volatile than some of the markets across Canada,” says Petramala.