Metro Vancouver home sales set or neared historic records in 2021 and 2022 on both ends of the spectrum.

Sales activity hit a record high in March of 2021 and closed 2022 near historic lows after accounting for

typical seasonal variation.

The key economic variable most responsible for this oscillation between extremes has been the spike in

mortgage rates, as a result of the Bank of Canada rapidly raising the policy interest rate to quell inationary

pressures not seen in the country in more than thirty years.

At the time of publication, ination remains stubbornly high, despite the Bank of Canada’s historically

monumental eorts to bring ination back to their preferred target range of between one and three per

cent. Largely because of this, mortgage rates are expected to remain higher than market participants had

been used to in recent times.

Historically, the data indicate that when mortgage rates rise rapidly, sales activity in Metro Vancouver has

tended to slow considerably and can take upwards of 24 months to recover to levels seen before the

tightening cycle began.

Today’s consensus view among many economists and professional forecasters is that the Bank of Canada

is at (or very near) the peak of the current interest rate tightening cycle. Predictions of mortgage rates

falling precipitously are few, if any, and it is largely against this backdrop that the Real Estate Board of

Greater Vancouver (REBGV) forecasts home sales activity to remain below the levels seen in 2021, and

roughly in-line with 2022 gures across product types.

Sales across Metro Vancouver are expected to reach approximately 28,500 in 2023. This represents a 2.6

per cent decrease over the 29,261 sales in 2022.

In percentage terms, rapidly escalating mortgage rates haven’t tended to impact prices as negatively in

Metro Vancouver as they have sales activity, historically speaking.

It was only the tightening cycle of the early 1980s, which resulted in a fairly signicant price correction

in the Metro Vancouver market. Nearly all other historical tightening cycles in Canada yielded more modest

declines in prices in the region. Interestingly, a few tightening cycles were even associated with price

escalation; a somewhat counterintuitive result that is nonetheless a veriable fact of the historical record.

So far, the current cycle has resulted in prices declining roughly 10% from the beginning of the cycle, with

the pace of decline beginning to show signs of slowing.

A key factor that has underpinned prices in the region over the last 40 years has been the steady population

increase in Metro Vancouver and surrounding areas. Despite the well-publicized challenges of housing

aordability in this region, the amount of people who continue choosing to reside here represent an

important source of demand pressure that continues to push up against a supply of homes that remains

scarce, in relative terms.

With the federal government recently announcing higher immigration targets between 2023 and 2025,

and with the best estimates of future population growth available suggesting BC and the Vancouver

region will continue growing, demand pressure is unlikely to abate signicantly, particularly over the

long term.

Reconciling this long-term outlook with the near-term, the rapid rise in mortgage rates over the past year

has reduced purchasing power and pushed many potential market participants to the sidelines. As the

real estate market continues to adjust to the higher mortgage rate environment, it is likely that more

buyers and sellers will step back into the market.

Against this counter-balancing backdrop of decreased market activity and purchasing power, as well as

a continued imbalance between housing supply and demand in the region, REBGV forecasts Metro

Vancouver homes prices to end 2023 up slightly compared to the 2022 year-end gures.