The Vancouver Housing Market: What to Expect in 2022

To this point in 2021, it’s been a year like no other in Vancouver’s real estate market (well, except maybe for 2020, but hey). The median detached sales price in the Vancouver Region is up 33% compared to this time (November) last year, total home sales just hit a 32-year November high as 5,328 transactions were recorded last month, and inventory—the number of homes available for purchase—just fell to an all-time low of 9,530. For a region that has added about 500,000 homes to its stock of housing over this period, this is an extremely low number. All of this is to say if we hadn’t used the word “oy” as part of our real estate talk commentary on the market last month, we’d definitely use it here. 

With so much imbalance in our market, fair questions are being asked about the sustainability of current conditions. Some are going as far as to ask if there is a bubble (this isn’t a new thought, but certainly a renewed one), or if we are lining ourselves up for a market crash. 

Rather than offer up any real estate predictions for 2022 in this column; here is a summary of the headwinds and tailwinds facing our housing market in the year ahead, as we see them.HeadwindsRising interest rates: With the latest jobs data showing robust labour market conditions across Canada in mind, the expectation is that the Bank of Canada will raise its policy interest rate by at least 50 basis points in 2022. This is something to watch, as it will constrain buyers’ ability to pay current prices (all else being equal). However, it’s worth noting that current price increases have materialized concurrently with five-year fixed mortgage rates having risen by 55 basis points in the past 8 months.

Potential foreign buyer ban: If the Liberal government follows through on their promise to ban “foreigners” from buying residential property in Canada, they will be eliminating all of 1.2% of demand in Metro Vancouver (while depriving the BC government of hundreds of millions of dollars in foreign-buyer-related property transfer tax revenue—but that’s a discussion for another day). Needless to say, this is unlikely to have a major impact on demand. TailwindsMigration: Demand for housing is expected to be strong next year and the year after (at least), based in part on the federal government’s elevated immigration targets that are in excess of 400K for each of the next 3 years. To-date in 2021, Canada is on pace to welcome 375K new permanent residents (an all-time record, though not all of these folks lived outside of Canada prior to this year, to be fair); of these, approximately eleven percent settle in Metro Vancouver. And this is not to mention the 43K net interprovincial migrants BC has attracted over the past 5 quarters—Nova Scotia coming in “second”, having attracted 12K people over the same period. 

Job market recovery: Metro Vancouver’s unemployment rate fell to 5.7% in November—higher than the 4.5% from the onset of the pandemic, but currently the lowest among major metros in Canada—which speaks to a job market that has been comparatively resilient over the past 21 months and is poised for more growth in the year ahead.

Household savings: Canadians have cumulatively saved more than a quarter-trillion dollars over the past 5 quarters—a total that exceeds the typical savings over such a period by a factor of almost 8. Some of this money has already been deployed into real estate, while the balance is ready to be spent in the coming months and years.

Equity: There is currently more than $400B in mortgage-free equity in Metro Vancouver (note that this total does not include any equity in households that have even a 1% outstanding balance owing). With this region averaging around $3B in monthly transactions over the past decade, this total equates to more than 11 years worth of demand. However it plays out, it’s clear that this equity will support housing market activity for years to come.

Unmet buyer demand: The BC Real Estate Association recently published research estimating that for every sale in British Columbia in 2021, there have been between 3 and 7 potential buyers. And with conversations with almost any realtor quickly landing on their buyers’ frustrations finding the right home at the right price, the presence of unmet demand is underscored. This will spill over into 2022 and beyond.Our rennie intelligence team comprises our in-house demographer, senior economist, and market analysts. Together, they empower individuals, organizations, and institutions with data-driven market insight and analysis. Experts in urban land economics, community planning, shifting demographics, and real estate trends, their strategic research supports a comprehensive advisory service offering and forms the basis of frequent reports and public presentations. Their thoughtful and objective approach truly embodies the core values of rennie.