Homebuying activity picked up in October, but affordability and supply challenges are leading a growing number of Vancouver residents to consider the growing trend
A jump in listings of homes for sale helped jolt Vancouver’s housing market into a busier October than the year before – but an apparent pivot towards more seller-friendly conditions could see buyers face a much different landscape in the months ahead.
The attached and apartment segments are leading the charge toward a seller’s market, according to Greater Vancouver Realtors (GVR) director of economics and data analytics Andrew Lis, who noted that the “detached segment [is] not far behind, suggesting the recent period of price moderation may be nearing an end.”
The outlook is particularly challenging for families, who are facing plenty of competition for the property types they need – even as others remain unsold. “You’re having a lot of properties stay on the market because they’re not as desirable as some of the others,” said Eitan Pinsky (pictured top), owner of Pinsky Mortgages in Vancouver.
“You have properties that are desirable: three-bedroom houses are going really quickly. The big issue is that you just don’t have that many buildings and units that are able to house families that are livable.”
That issue – and the likelihood of prices continuing to climb in 2025 – means brokers and borrowers should be attentive to the growing trend of multigenerational living, which involves the development of separate living quarters within a main home to accommodate different generations of a family.
“I’m seeing almost every single new construction out there for houses that are either two or three units or even sometimes four, so you have a basement suite or a duplex and a laneway house,” Pinsky said. “That’s just the norm, and maybe you’ll have [more] multigenerational living.”
According to the latest census, the number of Canadian households with more than one generation living in their property had spiked by 45% in 2021 compared with two decades prior.
Mathieu Laberge, Senior VP at CMHC, warns that mortgage arrears in Toronto and Vancouver are set to climb, with Vancouver’s delinquencies expected to double in the next year. https://t.co/VoV3jdtISs#housingmarket #housingcrisis #economicoutlook
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 20, 2024
How are rate changes impacting Vancouver borrowers’ mortgage choices?
The Bank of Canada has slashed its benchmark rate in recent months, another factor that’s helped bring plenty of buyers back into the Vancouver housing market.
While borrowers flocked to fixed-rate mortgage options as the central bank embarked on an aggressive spree of rate hikes in 2022 and 2023, variable options are once again becoming more popular – particularly with expectations that further cuts are on the way next year.
“We still have a maybe 40% variable, 60% fixed mortgage book right now,” Pinsky said. “There are a lot of people who think the variables are going to go down, and that’s why they want to take advantage of the decrease: not just the [likelihood] that variable rates are going to decrease, but the fact that you can lock in a variable rate in the future to a lower fixed rate.”
The Bank is scheduled to convene for its final rate decision of the year on December 11, with some of the speculation surrounding a potential oversized cut dampened by a recent uptick in inflation.
The consumer price index (CPI) jumped to 2.0% in October, up from 1.6% the prior month, a development that Pinsky believes has probably paved the way for a more modest reduction. “I don’t think that it’s going to be a 0.5% decrease,” he said. “It’ll likely be a 25-basis-point cut only because inflation went back up.”
Are rate cuts opening the door to a Vancouver market boom?
Lis suggested the Bank’s rate cuts to date had been one of the most prominent factors behind Vancouver’s hotter market last month. “The strong October sales numbers suggest buyers may finally be responding to lower borrowing costs after waiting on the sidelines for months,” he wrote.
Still, Royal Bank of Canada (RBC) assistant chief economist Robert Hogue believes the brisker clip seen in October could be difficult for Vancouver to sustain in the long run.
While housing demand will probably remain robust thanks to further rate cuts and upcoming mortgage rule changes, “housing affordability will continue to pose a major obstacle for many potential buyers for some time,” he said, “especially in large, expensive markets like Toronto and Vancouver.”
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