If the real estate industry in Vancouver -- and across Canada at large -- handed out hardware for 'Topic of the Year,' the 2022 award would undoubtedly go to: Interest Rates.
After beginning the year at 0.25%, the Bank of Canada's overnight rate is now up to 3.75%, and the quick but steady increase has rightfully given pause to would-be buyers. What should we make of this? Are things going to get better?
Doug McGowan, Managing Broker at Sotheby's International Realty Canada, says the Vancouver real estate market has indeed cooled off after going straight up during the COVID-19 pandemic, but buyers shouldn't be too alarmed because there hasn't been a dramatic fall.
Imagine you're travelling on a highway at 140 km/h, McGowan says, and you have to slow down to 120 km/h at a small curve in the road. You're slowing down, but you're still going pretty fast. "The market is receding, but it's still good."
From his vantage point as somebody who's been in the business for over 28 years, McGowan's read on the current market is that it's leaning towards a buyers' market -- which may be surprising amidst all this talk about rising interest rates.
"Real estate is a long-term play," he explains. "The average hold on a house is about seven to nine years, and a home that costs $1M today may be worth $10M a decade from now. Whatever happens today is almost kind of irrelevant."
McGowan points to a discussion he had with a client about 20 years ago, in which his client didn't want to pay an additional $2,000 on a $200,000 home.
"The home is now worth $1.5M, and we laugh about that argument," he says.
His advice? View the extra money you have to pay due to current interest rates as the cost of entering the market. "Don't let higher rates or prices scare you off," he says, "because even if you only hold the home for five years, you're still creating an equity position."
McGowan says the same thing about the "cooling off period" the Province of British Columbia announced in July, which comes into effect on January 1. He says it's caused some confusion and trepidation for consumers, but believes it's just a bit of added consumer protection and ultimately won't impact people in any dramatic ways.
His general advice, regardless of whether you're a buyer or a seller, is to understand the marketplace you want to be in, whether it's the Vancouver market, or the single-detached homes market, or the condominium market. Be cognizant of the housing type you want or have, understand the demographics of the market for that kind of housing, adjust your expectations accordingly, and then -- once you find a confident position -- pounce.
And looking forward, he believes the Bank of Canada has signalled that rates should stabilize by mid-2023, and that those who are a bit hesitant now should feel more comfortable with the new normal soon.
This article was produced in partnership with STOREYS Custom Studio.