What Can We Take from 2018? The Delicate Balancing of Supply and Demand
Basic economics dictates that a free market is largely controlled by supply and demand; real estate is no exception. The balance, or imbalance, between the two has generated the rising property prices over the past two years, and will continue to play a role as the market stabilizes. We saw a vast amount of demand going into 2018, and while sellers seemed to be in the best possible position, there was still reason to panic; what would become of the Canadian housing market if prices continued to soar?
Unique to the last two years, we’ve seen more government intervention than ever before. Record breaking sales numbers in 2017 gave us a running start entering 2018, but home buyers now faced the mortgage “stress test”, newly implemented by the federal government.
Why was this legislation implemented?
1. Interest rate shock for purchasers locking in extremely low interest rates that inevitably will be higher in 5 years
2. To slow the pace of a feverish market
The empty homes tax, speculation tax and school tax were all introduced by government bodies over the last two years with the stated intention of cooling the market. Across my 10 years of working in Vancouver real estate, never have I seen so much legislation introduced into what is deemed to be a free market. These efforts all impacted potential demand, without impacting the rate of supply coming onto the market and voila - the balancing had begun. The numbers we’ve seen for the end of 2018 indicate that supply now up, but demand is down. Stabilization of the Vancouver Housing Market is now in full swing.
Sales Will Continue At A “Stable” Pace Through 2019
“While average residential sale prices for all properties increased by two per cent, from $1,030,829 in 2017 to $1,049,362 in 2018, the number of sales dropped by 30 per cent (Remax Housing Outlook 2019).” Prices are still projected to increase by a small margin, but sales aren’t going to come as quickly as Vancouver seller’s have become accustomed to. These stable conditions don’t just mean buyers can take their time again, but sellers can enjoy some time to breathe too. Despite higher property evaluations, the past two years have been stressful for sellers. The slowing pace now provides the opportunity to ingest offers and react accordingly, instead of jumping to accept the highest bid. Previously, once you had closed the deal on your property, suddenly you’re looking to buy and experiencing the increased stress of finding a new home in a feverish market.
Thinking of Buying or Selling?
Sellers and buyers would be savvy to make a move now. Stabilization is still the name of the game, but interest rates more than anything will likely determine the speed of the market in 2019, Stricter mortgage rules and higher rates will likely have a negative effect on the pace of the market. For sellers, buyers will have smaller budgets to work with and will pay more for the amount they’re allowed to borrow. For buyers, it will mean that yes, prices may come down but their dream home they’ve been keeping an eye on might become out of reach if they don’t move before another rate increase comes along.