Vancouver-area home prices could drop 15 per cent due to pandemic

VANCOUVER (NEWS 1130) — Home prices in the Vancouver area could drop as much as 15 per cent due to the economic hit brought on by COVID-19.

Modelling shared by credit rating agency DBRS Morningstar outlines two scenarios of what could happen by 2022.

There is a moderate scenario, which is based on containing the virus spread sooner and the economy starting to recover later this year, or the more adverse scenario based on greater losses and disruptions to daily life happening longer than expected.

“This is probably a two to three year timeframe we’re looking at, so 2022 is probably a reasonable timeframe for those prices declines if this were to materialize. And again, there’s all sorts of uncertainty of what does the recovery look like, how long does it take to snap back, what happens with immigration levels this year, next year, and subsequent years,” says Paul Lebane with DBRS Morningstar.

RELATED: COVID-19 to push Canadian housing prices down: economist

He adds the reality is probably somewhere in the middle of both scenarios.

But the fact Vancouver real estate prices were overestimated could mean the area is in for a larger drop in values than in other parts of the country.

“The model-driven results were really showing that house prices were somewhat overvalued going into this downturn. Probably not as overvalued as they may have been in 2017, but nevertheless somewhat overvalued and this downturn really acts as a catalyst for some degree of correction,” Lebane explains.

The assessment shows real estate was already overvalued, and when mass job losses and people struggling to pay their mortgages are added in, the prices range shows, even with a moderate outlook, a decline of 10 to 15 per cent.

The agency acknowledges there are many variables, but the big question is how long it will take for the economy to bounce back, with Lebane noting the speed of the recovery will be key in whatever happens in reality.

“We don’t know how long the shutdown lasts, we don’t know how quickly the job market comes back, we don’t know what the recovery looks like… there’s a great deal of uncertainty, more than past recessions probably,” he says.

Meanwhile, Canada’s job numbers are set to be released Friday, and one research group already expects April’s numbers to eclipse the previous month, which saw more than one-million jobs lost.

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