In any market, there are factors that are favourable to prices increasing and those that are more favourable to prices decreasing. What matters is, at the margin, which side is dominant and whether any of the factors flip or disappear entirely.
The process operates like an old-fashioned scale: place too much weight on one side and it fully tips in that direction. This was the case in the middle part of the last decade, when the supply of existing properties was not nearly capable of satisfying the demand from end users, local investors, foreign investors and developers all at once. Prices doubled in many cases. The opposite occurred in the early ’80s and early ’90s, when investor appetite and affordability crumbled under the weight of high interest rates.
Today, the balance of factors is clearly on the side weighing prices down: the headwinds. That said, the tailwinds are evidently strong enough to provide support for prices so that they don’t fall in a disorderly fashion. Despite a more difficult market across Greater Vancouver, North Vancouver and Lynn Valley are only showing single-digit price declines.
So what are the headwinds we are observing most often among buyers who are hesitant to purchase? Inventory levels are still quite high. There’s lots to choose from. There’s a mentality that if another buyer gets their target property, it’s nothing to worry about: another one will be available eventually. In the condo market, that’s even more true. Significant new construction from projects started in 2022–2024 is still set to be completed.
Also at odds with prices continuing to rise is the recent reversal in population growth, as immigration numbers are being cut and some temporary residents are not having their visas renewed. This is contributing to softness in the rental market and a retreat by investor buyers.
There’s a whole category of headwinds created intentionally by governments to cool the market: foreign buyer bans, anti-flipping taxes, short-term rental restrictions, rental increase caps and more. While many of these may be good for the health of the market, they are removing potential buyers. Developers are also deterred from entering the market to buy land for future new homes because the cost of that land, plus the cost of construction and permitting, does not add up to a price that buyers are willing to pay for the finished product. The math doesn’t work for them either.
The geopolitical question is also important for those who might have employment or capital dependent on trade with the U.S., Iran, China or a number of other countries. It’s hard to take risks when so much seems to be up to the whims of one person.
On the other side of the scale, there remains persistent structural demand for housing on the North Shore. People who want to move to the North Shore from other parts of the region, those who want to move up to a larger home, and those who have already delayed their purchase for many years and can’t wait any longer. When prices slip, there is almost always one of these people standing ready to buy.
Helping those people are often family members who built home equity over the past few decades and are now using it to help their children and grandchildren secure housing in a still deeply unaffordable place. They want their loved ones to stay nearby – and this is the only plausible solution.
The province and municipalities are making some attempts at encouraging the creation of new housing. With a long enough time horizon, perhaps this concept of multiple dwellings on single-family lots will make economic sense. It’s great to have the ability to build a laneway house, but at a cost of more than $500,000, few are choosing that path.
Of course, the removal of any of the headwinds would provide a tailwind of sorts, and vice versa. This is what makes predicting what might happen very difficult over any time frame. Throughout this article, we haven’t yet touched on interest rates, which are possibly the most volatile of all the factors. Currently, they are neither a headwind nor a tailwind. They are lower than they were a few years ago, but higher than buyers would like. Subject to change.
Rather than trying to pick the perfect opportunity to buy or sell at a “good” price – which, given the number of variables we’ve listed here, appears to be quite difficult – perhaps a better approach is to pick your timing instead. We know favourable times to sell are usually the spring and fall, while favourable times to buy are usually summer and winter.
Leave the rest up to the pundits.
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