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A combination of narrowing price gaps and sky-high demand has reduced supply in Vancouver, leaving buyers with fewer purchasing options.

According to Dexter Realty’s October Sales Report, detached home prices in North Burnaby ($1.74 million) or East Vancouver ($1.71 million) are currently comparable to South Surrey-White Rock, where the October average reached $1.76 million.

Meanwhile, the composite home price difference between Greater Vancouver and the Fraser Valley in October 2019 was $272,500 but shrunk to less than $150,000 last month. That price levelling has produced a chicken-or-the-egg scenario and limited supply across the region.

“This price-gap shrinkage is the result of and a key reason for the current lack of new listings on the Metro Vancouver market,” stated the report. “In the misty past – like 36 months ago – Greater Vancouver homebuyers could count on selling and downsizing to a smaller, pleasant Fraser Valley community and pocketing a healthy premium.”

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The supply shortage is significant. There were only 8,492 active listings in Greater Vancouver at the end of October, down from the 9,728 active listings at the end of September and a drop from 13,066 at the end of October 2020.

Greater Vancouver saw 3,455 homes sell in October but only 4,120 new listings were added to the market, down 22 per cent from September and 28 per cent lower year-over-year. With an 86 per cent sale-to-listings ratio during October nearly every listing that hit the market sold, and in some areas like Burnaby and Coquitlam there were more sales during the month than there were new listings.

“For years, there’s been a concentrated, coordinated push by all three levels of government to hold back housing demand,” Dexter Realty noted in its report. “But now we’re left with a complete lack of supply, the lowest levels ever recorded at this time of year.”

Despite the reduced supply, demand remains high. Monthly sales in Greater Vancouver were up 11 per cent from September and 22.4 per cent above the 10-year October average. As a result of the supply-demand dynamics, the Vancouver-area MLS Home Price Index rose at its fastest pace (14.7 per cent year-over-year) in more than three years.

Demand should remain high in the short term to cap a record-setting year. According to the British Columbia Real Estate Association’s (BCREA) Third Quarter Housing Forecast Update, province-wide home sales in 2021 will set a new record of 118,350 units.

While those numbers are expected to drop next year due to a combination of reduced affordability and easing pandemic restrictions, “with the B.C. economy on track for very strong growth this year and next, along with the eventual return of normal migration flows, home sales are anticipated to remain well above long-run average levels into 2022.”

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