A duplex for sale in Vancouver on July 6.JENNIFER GAUTHIER/The Globe and Mail
Vancouver property sales have slowed, as sellers are less likely to list their homes. But prices are holding fairly steady in the country’s priciest market. That means for renters, the pressure on the rental market is higher than ever, exacerbated by interest rate hikes and increased demand. And that pressure could intensify now that landlords have an opportunity to increase rents.
Vancouver Tenants Union advocate Aïssa Aggoune said there’s a general anxiety among renters who are wondering if they will be able to afford their rents in the following months.
“The anxiety is caused by numerous factors which are compounding the already existing housing crisis and turning it into a real nightmare for the local families who live and work in Vancouver,” Mr. Aggoune said.
New legislation introduced a year ago allows an additional rent increase to recoup costs of capital expenditures on apartments, such as updates to electrical and mechanical systems, improving security and energy use. Mr. Aggoune said the new increases have largely gone under the radar. He’d like to see the increases suspended until inflation comes down.
“The process of fighting these rent increases is very long and exhausting for most tenants who do not even fully understand the legislation,” Mr. Aggoune said.
Rents on newly listed apartments have soared in the last year. According to Toronto-based HouseSigma real estate platform, the median rent for all Metro Vancouver rental listings on the Multiple Listing Service (MLS) went up from $2,500 in June, 2021 to $3,400 in June, 2022.
Realtor and HouseSigma spokesperson Hao Li said there is a key relationship between sales and rentals because when the sales market slows, people stay in rental apartments, increasing demand. As well, those who are experiencing interest rate hikes as their mortgages renew will pass the cost along to renters if they can.
According to HouseSigma A.I. generated data (which uses MLS and real estate board statistics), the median price of homes in Delta dropped by 28.3 per cent between February and June, followed by Surrey at a 23.4 per cent decrease and Maple Ridge about the same. Vancouver home prices dropped 11.7 per cent and West Vancouver by 11.4 per cent. North Vancouver only saw a 5.6 per cent drop. Overall, Metro Vancouver saw a 13.5 per cent decrease in median home price.
A broader perspective, such as that provided by the Canadian Real Estate Association, which looks at the benchmark price over a year, shows a far slower adjustment.
In April, 2022, the benchmark price for all homes in Greater Vancouver reached $1,264,700, according to the Canadian Real Estate Association. In April, 2021, that price was $1,099,300, a 15-per-cent increase.
Today it’s at $1,235,900, a slight decrease of 2.28 per cent – but still much higher than the benchmark price of June, 2021. Benchmark price is the estimated value of a home with typical characteristics.
“Home prices have eased in parts of British Columbia, although the B.C. provincial totals have been propped up by mostly static prices in Greater Vancouver,” said the CREA release.
Mr. Li, who is based in Vancouver, said prices in Vancouver have not been immediately impacted by the higher interest rate, which recently went up a full percentage point to 2.5 per cent. Some suburbs are likely hit harder because of the pandemic phenomenon that saw first-time buyers moving away from the city. That trend has eased up. Vancouver prices are staying strong because instead of reducing their prices, would-be sellers are not selling.
“We’re not yet seeing a significant price drop for the Vancouver area, no,” Mr. Li said. “Sellers know that if they put up their house up for sale now they can’t use the usual tactic, which is to list low and hoping everybody will bid high. Now, everybody’s mindset has shifted into, ‘whatever price you put out, people are more likely to offer something less, rather than bidding more.’ So they are less likely to want to sell their properties, so less inventory.”
Cancellations of listings in Greater Vancouver have gone up by 139.2 per cent since February, according to HouseSigma data.
Real estate agent Patricia Houlihan said some of her clients know it’s better to buy when the market slows, as opposed to the fear-of-missing-out phase during the beginning of the pandemic. Ms. Houlihan purchased her own home in 2008 just at the start of the economic downturn. There were fewer buyers and offers were subject to sale. The price of her home went down, but then it went back up.
“People who were fighting to buy houses and putting in stupid prices, now they are saying, ‘the market is going down, I’m going to wait.’ Really? Because you can now buy with subjects, and we don’ t get the unicorns right now,” she says, referring to that one buyer who will throw “crazy” money at a property.
”Right now is a great opportunity for buyers, because they can get something and get an inspection and think for a few days, and breathe. But it’s also good for sellers, because prices have gone down less than 2 per cent.”
She’s still seeing multiple offers. There are buyers who aren’t affected by the rate increase, and there are buyers who are in a panic to use their lender rate hold before it ends.
“The rates are still very, very low, as long as people can afford it. I just think the market has not changed enough for all the reaction that is happening.”
Grant Bazian’s job is to be on the lookout for signs of financial distress. Mr. Bazian is president of MNP’s insolvency practice, the largest in Canada, which handles corporate and consumer insolvency such as bankruptcies and liquidations.
An MNP consumer debt index released in April, prepared by Ipsos, showed that British Columbians had the largest drop in disposable income out of all Canadians, spending $269 less than they had a few months previously.
Not helping matters is that Vancouver has some of the highest dollar mortgages in Canada, says Mr. Bazian, making mortgage-holders particularly sensitive to any fluctuation. This week MNP released more bleak news: 27 per cent of Canadians are cutting back on essentials, such as food, utilities and housing costs.
Mr. Bazian was surprised when the Bank of Canada increased its benchmark rate the most it has since 1998, bringing the overnight rate to 2.5 per cent. But such a big jump tells him that there must be serious concerns. The younger generation who’ve only ever known a low interest rate will be particularly alarmed, he said.
“A 100 basis point jump, that’s something else. I wasn’t expecting that. … I think they are doing their best to control [inflation]. I don’t know how effective it’s going to be, because there are other elements to inflation, other than supply and demand.”
The biggest concern for policy makers is affordability for the average Canadian.
“I think it’s the inability for the average Canadian to afford the necessary household goods, that’s what it comes down to – to afford their mortgage payments, the basic necessities.
“It shows me consumer confidence and their financial well being are very low. And I think there is a lot of anxiety and stress with families, and a lot of them are uncertain as to what to do and how rising interest rates affects their financial well being.”
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