The rennie review is produced monthly by rennie intelligence, including the latest real estate data for Vancouver Region’s housing market.As summer comes to a close and we transition into the fall—a somewhat ironic name for a season during which we’ll likely continue experiencing high inflation and rising interest rates—we are facing much different economic conditions today here in Metro Vancouver than we were as recently as the spring. In turn, the evolving economic landscape is having a direct impact on our local housing market in both direct and indirect ways.

High inflation has been a phenomenon both here in Canada and around the world since the early part of 2021, driven by elevated consumer demand, disrupted supply chains, China’s continued enforcement of its zero-Covid policy, and the war in Ukraine. More specifically, year-over-year consumer price changes have exceeded the Bank of Canada’s target range of 1-3% since April of last year, peaking at 8.1% in June 2022 before easing to 7.6% in July. Predictably, this has spurred the Bank of Canada to hike interest rates in response, with the Bank having raised its policy rate five times to-date in 2022; this has brought the overnight rate up to 3.25%, a level not seen since April 2008. Meanwhile, bank prime rates are now up to 5.45% and fixed mortgage rates—which have been rising since February 2021 and have been, in part, influenced by the Bank’s more recent policy of quantitative tightening—are now also at their highest level in more than a decade.

While the dramatic and rapid increase in borrowing costs has had a significant impact on some households—including parts of the first-time home buyer, mortgage renewer, and variable-rate mortgage holder groups—its biggest impact has been to gum-up the demand side of the market. This is seen in depressed sales counts, with the 2,850 MLS sales in the Vancouver Region in August sitting 45% below last August’s level and 31% below the past 10-year August average.

Notably, more-expensive money has not had wide-ranging impacts on the housing market to-date vis-a-vis elevated supply; in large part, this has been due to the state of our labour market. To put it simply, when people who want to work are working, listings remain at or below the long-run average; when people aren’t working and earning an income, supply tends to swell as some homeowners can’t afford their mortgages.

To wit, the national unemployment rate reached an all-time low in June, at 4.9% where it remained for two consecutive months before ticking up to 5.4% in August. In Metro Vancouver, the unemployment rate has remained below 5% since May, nestled in at 4.8% most recently (in August). The historically-robust relationship between the region’s unemployment rate and MLS inventory has continued to hold through 2022, with our well-functioning labour market being accompanied by a total listings count that declined by 7% from July to August, to 14,917—20% below the past 10-year August average.

With the Bank of Canada poised to further raise rates to return inflation to its desired target of 2%, the nature of current and would-be borrowers’ participation in the housing market will continue to be impacted. That said, given the connection between the level of housing supply, overall housing market conditions, and the labour market, it’s the latter that we’ll be keeping a particular eye on.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.