A report by Dexter Realty tells everyone to brace for a fascinating year.
“As the Metro Vancouver housing market comes off a record sales year, we are entering what could be the most interesting 12 months this region has ever seen,” executive Kevin Skipworth wrote.
Skipworth is a partner, managing broker, and economist with the Vancouver realty company.
Skipworth issued his latest report on the heels of the 2021 annual recaps released by the Real Estate Board of Greater Vancouver (REBGV) and the Fraser Valley Real Estate Board (FVREB).
The two boards have stated that last year’s sales set a new best record in their respective jurisdictions.
In Greater Vancouver, residential sales totalled 43,999 in 2021, marking a four percent increase over the previous all-time record of 42,326 in 2015.
Over at the Fraser Valley, realtors made 27,692 sales in 2021, beating the previous best annual record of 23,974 in 2016.
With this backdrop, Skipworth lists three realities that he believes will define the housing market in 2022.
Canada does not have enough housing supply
To make matters worse, Skipworth said that the government “does not have…the political gumption to provide the housing needed for the biggest surge in immigration this country has ever seen”.
“According to Statistics Canada, this country absorbed 123,000 immigrants in the third quarter of 2021 alone: the highest level for any quarter since 1946, at the end of World War II,” he wrote.
For the entire year of 2021, Skipworth stated that Canada welcomed 403,000 new residents.
“If former immigration surges are any indication, up to 30% of newcomers to Canada will immediately or eventually – usually within two years – locate to B.C. and 95% of these will come to Metro Vancouver,” he explained.
However, the “supply of housing in Metro Vancouver has fallen to record low levels”.
This is “due primarily to local governments, construction of new homes is not keeping pace with the current population, let alone meeting the needs of a hundred thousand newcomers every year”.
The REBGV stated in its January 5, 2022 report that the new year starts with 5,236 active listing.
This level represents a 38.7 percent decrease compared to December 2020 (8,538), and a 26.7 percent decrease compared to November 2021 (7,144).
The board noted that it’s the lowest level of listings in more than 30 years.
It’s no different in markets served by the FVREB.
The Fraser Valley board reported on January 5 that as of the end of December 2021, there were only 1,957 units for sale, which is the lowest in more than 40 years.
Skipworth stated: “Criticize the supply side discussions all you want but a fundamental flaw in the Metro Vancouver and many other real estate markets that we are experiencing right now is a significant lack of homes.”
Federal government wants to tax homes some more
What’s the proof?
Skipworth cited new report funded by Canada’s national housing agency, which calls for a new and additional tax on houses.
The report was published by Generation Squeeze, with funding from Canada Mortgage and Housing Corportation.
The paper recommended a “surtax” of 0.2 percent to 0.5 percent for homes valued between $1 million and $1.5 million; 0.5 percent on homes of $1.5 million to $2 million; and one percent for homes valued $2 million and over.
“Will they slap a capital gains tax on the sale of principal residences next, despite its strenuous denials?” Skipworth asked.
Taxation is an example of a demand side measure meant to tamp down activity in the market.
However, Skipworth argued that demand side measures “clearly are not the long-term answer”.
“At some point there needs to be real effort to increase supply and allow it to be increased in a meaningful way,” he wrote.
Homes will remain expensive
“The final reality that every home buyer, seller and renter in Metro Vancouver will face is that the cost of housing here is never going to come down,” Skipworth stated.
This comes “despite the barriers to demand that every level of government has thrown up over the past 10 years”.
“The price increases are being fueled by the housing shortage, and the shortage is because of rising prices,” Skipworth said.
How is that?
By way of illustration, Skipworth noted that the benchmark price of a detached house in Vancouver, Richmond, West Vancouver and Whistler is now more than $2 million.
It is over $1.8 million in North Vancouver, Port Moody, and most of Burnaby.
“Sticker-shocked home owners are reluctant to list their home because they don’t know where they can afford to move to,” Skipworth stated.
Over at the Fraser Valley, the benchmark price of a detached home has increased to $1.5 million, a 3.6 percent compared to November 2021 and 39 percent more compared to December 2020.
“It won’t be easy, but Metro Vancouver has never been an affordable market,” Skipworth pointed out.
That shouldn’t come as a surprise because there is “nowhere better to live in Canada”.
In December 2021, the Canadian Real Estate Association released a forecast stating that he average price of a home in the country could post an annual increase of 7.6 percent in 2022.
The association qualified that this is a “somewhat conservative" prediction.
It doesn’t look pretty for people wanting to buy homes this year.
“The bottom line: buyers will continue to struggle in 2022,” Skipworth stated.
While there may come a “rush of new listings in January and into the spring…it won’t be enough”.More