The Bank of Canada held the overnight interest rate at 5% this week, as expected. But as soon as there’s a rate drop there will be accelerated buying activity, say industry experts.
For variable rate mortgage holders, it’s going to be a matter of riding out the next few months until that rate drop happens. It’s meant a market slowdown in the interim, as everybody considers their options.
“I think they will rush in at a lower interest rate,” developer Hani Lammam says of next year’s buyers. Lammam is executive vice president of Cressey Development Group, which develops condos and owns several rental buildings in the Vancouver region.
“We saw that [mentality] in the spring [of 2023], ‘I better get into the market now.’ I suspect that will happen again because at the end of the day, we are under-supplied. “As soon as things have stabilized, they will jump back in.”
In the meantime, it’s a decent window to buy something without the pressure of competing bids, say those in the industry. Predicting a price adjustment is trickier. Pundits had expected a major slowdown this year, and although there’s been a sales slump, prices haven’t fallen. That said, it might be a window of opportunity. With little competition, resale buyers might be able to negotiate, if not on price, then at least on the conditions, such as longer closing times.
“The market has slowed down dramatically as far as sales activity. And it’s because it’s a bit of a standoff,” says Lammam. “For home buyers, families can only afford so much. And sellers have seen a lot of appreciation in their home values, and are reluctant to give it up. So now it’s a bit of a waiting game. Who’s going to break first?”
Realtor Patricia Houlihan, who specializes in resale properties, said the market has stalled.
“There are so many listings just sitting there and nothing is happening,” she said. “I haven’t ever had a worse September. I have nine listings, all well priced with no offers.”
When they do make offers, they’re sometimes on condition of sale, which has been unheard of for the last several years in Metro Vancouver.
“I bought a place last week because I subscribe to the idea that if the market slows down, you buy,” said Houlihan. “I told my buyers, ‘buy now,’ but they think that prices will come down. The problem is, people tend to do what everyone else is doing.”
According to Real Estate Board of Greater Vancouver statistics for September, the composite index price for all Metro Vancouver properties is at $1,203,300, slightly higher than a year ago. The sales-to-active listings ratio for September is 17.7%. Prices don’t typically start to fall until the ratio gets down to 12%, when it becomes a buyers’ market. Right now it appears to be nobody’s market.
The Board attributed the pressure on prices to little inventory as sellers choose to hold.
Often when there’s uncertainty, people try to time the market, and determine when it’s hit bottom before they jump back in. The problem is that it’s so difficult for people to go against the grain.
“When [prices] drop you see a flood of activity,” said Lammam. “Today you can negotiate. Not many buyers are in the marketplace. A year from now, when the rates drop, it’s you and everybody else.
“I’m a real estate professional and I’ve never been able to time the market.”
A recently released Sotheby’s report noted a brisk third quarter, but a slow fall. By September consumer behaviour showed a reluctance to make a move, with 172 properties sold over $1 million, a drop of 31% since September 2022.
As far as the presale market, he and others say it’s holding strong. Marketer Jacky Chan said seven highrise projects were announced in the last two months in Burnaby’s Metrotown alone.
“The competition is fierce but the prices have not come down,” says the president and founder of BakerWest Real Estate. “I wouldn’t say it’s sluggish or like nothing is happening. You are still seeing a lot of deals in different pockets of the market. There are even single-detached houses in Richmond that are selling fast, houses over $2.5 million. “
On the expensive west side of Vancouver the pace has slowed as sellers and buyers wait to see how city policies play out, such as the new multiplex allowance on single-detached lots. The city recently passed the allowance of four-to-six-unit multiplexes as a way to create missing-middle housing options.
“There is still some confusion,” said Chan. “Even after the rules come out, people are running the numbers. It’s give and take: there’s more density, but there are development requirements making it harder in certain ways.”
As for rates, he also believes they will come down “as early as the middle of next year,” which will coincide with American policies. The market should swing upward around then.
“So it’s like waiting on the sidelines.”
