Read the updated version here: The Vancouver Housing Market: What to Expect in 2023With the kind of year we’ve experienced here in Metro Vancouver in 2022, particularly as viewed through the lens of our housing market, I’m sure we’d be forgiven if we chose to frame up the year that was using some version of the old trope “a tale of two (insert subject here).” Truth be told, we’ve used it before—but not this time; we’ll leave it to others to do that. Instead, we’re choosing to adopt a different Dickensian reference—that of “Great Expectations.”

With that in mind, along with the notion that economic forecasting was invented to make astrology respectable—thanks to John Kenneth Galbraith for that—we’re happy to share here some thoughts and musings on, if not outright predictions for, Vancouver’s housing market in 2023 (for specific predictions you’ll have to wait for our rennie outlook report, which will be published at the end of January). Inflation moderationAnnual consumer price inflation in Canada peaked above 8% in June but has been falling to under 7% since then. This is still much too high for comfort—be it that of the Bank of Canada, consumers, or businesses—but the inertia in inflation is one of downward movement based on underlying easing of supply-side factors (shipping container costs, energy prices, and other commodity costs, specifically) and demand-side ones (housing market activity is lower and retail spending is down). With inflation having run up aggressively in early 2022 on the back of, among other things, what was then a new war in Ukraine, a simple arithmetic inspection of the inflation calculus suggests that the absence of a similar global-impacting shock in early 2023 will, on its own, yield more slowly-growing prices in the coming months.   Lower interest ratesThe pace of the extent of interest rate increases over the past year has almost entirely been in response to high and rising inflation (we say “almost entirely” because fixed mortgage rates were rising before the Bank of Canada took any explicit action to fight inflation). With inflation expected to continue to moderate relatively steadily over the next 12 months, the Bank of Canada will, in all likelihood, pause—we’ll go further and say that they’ll halt—their rate hikes in the new year. Bond yields and mortgage rates have already started to fall from their recent peaks, with the average discounted 5-year fixed mortgage rate sitting at 4.69% compared to 5.19% one month ago.  A return to more typical buying and listing activityStability in consumer prices (i.e. inflation) and in borrowing costs (i.e. interest rates) will, in turn, create housing market conditions that are more typical insofar as sales counts and inventory levels are concerned. By the spring of 2023, we expect the number of homes available for purchase to be about 50% greater than it is now, with sales counts naturally rising as buyers have more options and more certainty as it relates to prices and financing.   Rising home valuesHome values are unlikely to rise in any meaningful way between now, the end of 2022, and the spring of 2023; indeed, there are few, if any, material tailwinds one can point to as a real source of increasing housing prices in the next few months. Having said that, the expected cessation of rate hikes by the Bank of Canada in early 2023, combined with falling mortgage rates and housing demand that has pent-up over the past 6 months, could conspire to create a floor for home values in the spring before helping to support more moderate growth in prices through the balance of 2023.   

So there you have it: some food for thought as we round the corner into a new year—one that will most likely be characterized by a greater degree of stability, certainty, and predictability than the one we’re closing the book on. Speaking of which, even if one’s expectations are not great for the year ahead, we’re likely to avoid all of the twists and turns (or at least most of them) that featured so prominently in 2022.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.