VANCOUVER (NEWS 1130) — The Metro Vancouver real estate market is showing no signs of slowing down despite the COVID-19 pandemic, defying the expectations of many experts and major financial organizations.
Housing sales were 20 per cent above the 10-year average in August.
Housing economist Tom Davidoff, with the UBC Sauder School of Business, admits the surge in sales is surprising.
“It’s just hard for me to believe that you can have economic activity depressed by 20 per cent or whatever it is and still have a booming real estate market. But, so far, that instinct has been incorrect and, as usual with the Vancouver real estate market, I expect to be proved wrong in my conjecture.”
Fall: ‘No idea’
Davidoff is hardly alone in this. Back in June, Canada Mortgage and Housing — the federal housing agency — projected gradual price declines over two years.
And like anything, the price declines could still be ahead of us.
“No idea,” Davidoff said when asked about what the fall market could look like. “At some point, I kind of think the chickens might come home to roost. If you start to get vacancies, if mortgage deferrals, which may have kept a lot of people in their homes start to go away, maybe people have to dump their homes or investment properties. In that case, maybe you see some weakening in the market.”
Davidoff suggests pent-up demand could be a contributing factor to the hot summer market, after the slowdown we saw as we were all told to stay at home as much as possible in the early days of the pandemic.
Sales strong across North America
He adds sales were strong in winter in the Metro Vancouver market and across North America.
“So I think we’re about where we probably would have been without the pandemic. And, again, it’s the low interest rates and the extra demand for space versus the considerably worse economic outlook.”
He suspects another factor is that people who can afford property have jobs that have been the least impacted by the pandemic, as opposed to those in the service sector and other industries forced to cope with physical distancing and other health restrictions.
Ultimately, despite plenty of forecasts projecting a drop in Metro Vancouver real estate values, Davidoff points out there are factors keeping prices stable.
“I think the fundamentals here are extremely strong,” he said. “We’ve got largely, inexplicably lower interest rates than we’ve ever had. People project that the cash flows way into the future are just as valuable as money today. We have a fundamentally strong demand growth here. We have a difficult supply environment, so in the long run you expect the rental flow that comes out of houses to grow. And with low discount rates, that means high asset values.”
That said, there are questions about the fall, with even the Real Estate Board of Greater Vancouver pointing to the uncertainty of the situation.