More choices for buyers, more competition among sellers

It was a September to remember for housing in Greater Vancouver, with the slowdown of the resale market accelerating in the most recent month. Buyers have remained tentative, resulting in growing inventories across the region and product types.

Across Greater Vancouver, the year-over-year decline in sales of 43% (between September 2017 and September 2018) represented the 9th-largest drop registered since the mid-2000s, and the largest since the Great Financial Crisis (GFC) of 2008/9. This is a noteworthy deviation, with year-over-year sales having been down by between 27% and 37% in each of the past 6 months. No one product type was responsible for, or immune from, this trend, with detached property sales down 41% year-over-year, condo sales down 44%, and townhome sales down 45%.

Driven mostly by this slow sales activity, inventories have expanded. While only marginally for detached (7% above last year’s level), inventories grew more significantly for townhomes (a 55% year-over-year increase) and condos (75% higher). With more options available to buyers than in previous months and years, they appear to be more discerning and patient in their home purchase decision-making. 

These trends are reflected in changes in regional sales-to-listings (S-L) ratios. On the detached front, the market now strongly favours buyers, with a detached S-L ratio of 8%. We need to look back to the end of 2008 and the height of the GFC to see conditions for detached that were as favourable to buyers. Compared to the robust sellers’ markets that prevailed at the beginning of 2018, conditions in the townhome and condo segments of the market are now squarely in balanced territory, the result being a mitigation of recent price appreciation that has characterized the multi-family market.

On a benchmark basis, prices for townhomes and condos remain above where they were one year ago (by 6% and 7%, respectively), though they have declined in each of the past three months (2% for townhomes and 3% for condos in aggregate). Detached benchmark prices, on the other hand, reflect an entrenched buyers’ market that has prevailed for the past three months, with prices off by 5% year-over-year, and by 4% since the recent high achieved in March 2018.

Overall, there is a definite theme to the latest market numbers: slowing demand, increasing supply (or choice), and softening prices. Given the levels from which the market has declined, these trends reflect more of a normalization of conditions than anything else. The key difference between these recent trends and previous periods of market softening is that, in this case, there has been no specific economic trigger to the slowdown. BC’s economy continues to outpace most other provinces’ in Canada, and Greater Vancouver’s latest unemployment rate of 4.5% is the lowest among all major metro areas in the country. Instead, it has been the unprecedented policy interventions at the national level down to the municipal level that are having an effect. In light of this, our outlook for the market is one of continued normalization for the remainder of 2018, with growing inventories and choice resulting in more competition among sellers than has been seen in recent years.

The rennie review is produced each month by rennie intelligence, which includes the latest real estate data for Vancouver and the Lower Mainland's housing market. Check out the latest edition of the rennie review here.