About five years ago, I had a realization: real estate, and housing markets more specifically, are virtually exclusively viewed and analyzed — particularly within the industry itself — in a vacuum. There was heavy focus on the “whats” and little focus on the “whys.” There had always been lots of data and perspectives on sales counts, listings trends, and price changes, but what was conspicuously absent was the consistent, quantitative consideration of the factors influencing housing — demographics, economics and the labour market, inflation and interest rates, and even government policy and regulations.
This was underscored for me, around this same time, by a conversation I had with a colleague within the industry, who asked me where I thought downtown Vancouver's per-sq.-ft prices would go in the next two years.
“They’ve done this over the past two years,” he explained, angling his arm upwards. He then used his other hand to draw an imaginary path through the air that extended along the same angle as his arm, seeking confirmation that “[prices] will probably just do this, right?” Riiight.
Observations and conversations like these led to the birth of the rennie landscape, a report I began writing on a semi-annual basis to both capture and disentangle the myriad factors, direct and indirect, impacting our housing market here in Metro Vancouver. We continue to produce it to this day, with the intended audience ranging from would-be home buyers and sellers and realtors to developers, institutional investors, and government.
I’m saying all of this here because rennie’s intelligence division has just produced its Fall 2023 edition of the rennie landscape and, given the lack of stability and certainty in and around our market at the moment, I thought it would be worthwhile to share a few insights from the report that can, hopefully, provide some context and insight.
Population Growth Is, Well, Growing
Canada added a record one million people in 2022 on the back of robust international in-migration of permanent residents, students, and those with worker visas. Incredibly, we’re on track to surpass last year’s record growth by the end of 2023: in the year-to-date through August, we’ve issued 1.32 million student and work permits (compared to 1.17 million in all of last year), and we’ve welcomed 339,000 permanent residents (also through August), putting us on pace for record admissions that exceed 500,000.
Population growth on this scale has important implications for our labour market and the capacity of our economy to produce, and produce efficiently. It also has a tremendous knock-on effect for housing markets across the country, especially in the already-supply-constrained region that is Metro Vancouver, and underscores the importance of figuring out how we can deliver more new housing, faster.
As Inflation Wobbles, The Economy Hobbles
Canadian consumer price inflation has fallen significantly from its multi-decade apex of 8.1%, in July 2022, to its current level of 4.0% (as of September 2023). That said, the road to 2% isn’t as obvious as we’d all like it to be, and we expect some bumps in the road as we go from where we are to where we need to be on this front.
What’s clearer than the short-term path for inflation, though, is that our economy is slowing and will continue to in the months ahead: per-capita retail spending has slowed, housing markets are seeing fewer buyers and more sellers, and the job market has, for months now, been characterized by rising unemployment, a jump in employment insurance claims, and part-time job additions. As I said in my last column, this isn’t necessarily obviously good news, but it does mean that…
The End of (Really) High Rates Is In Sight
After a historic tightening campaign, Canada’s central bank is currently wielding a trend-setting rate of 5.00%. This should be peak, given the tremendous potential for significant lagging effects of the rate hikes that have already taken place. With most domestic sources of inflation having been doused by higher borrowing costs, the economy slowing, and the bank looking to shave at least two full percentage points off of the current rate to return it to what is referred to as “neutral,” expect interest rates to begin falling in the first half of next year — good news, no doubt, for many homeowners and would-be first-time buyers.
This article was produced in partnership with STOREYS Custom Studio.