The relentless ascent of B.C. home prices continued through February as housing demand remained robust and inventory low.
However, a sharp rise in new listings could signal a trend to a more sustainable market as more sellers look to sell amid high prices while rising interest rates pinch prospective buyers.
The average Multiple Listing Service price in the province rose another 1.8 per cent to a record $1.07 million, marking a seventh straight monthly increase, and a 24 per cent year-over-year gain. Prices rose in eight of 11 real estate boards across the province, led by the Okanagan region.
Benchmark home values, which adjust for compositional effects, accelerated during the month, with Vancouver Island up more than two per cent and the Okanagan and Lower Mainland up 3.7 per cent.
Rapid price growth reflects the ongoing imbalance between demand and supply. Despite rapid price gains across the province during the pandemic, home sales were unchanged from January at a seasonally adjusted 10,130 units. While off pandemic highs by 30 per cent, levels remained more than 50 per cent above pre-pandemic pace. Elevated demand remains buoyed by pandemic factors of low interest rates, demand for space and from-home work, which have promoted living in smaller regions. That said, speculative investment has increasingly been a factor as has the fear of accelerating prices, which has triggered a pull forward of demand, particularly in advance of higher interest rates. Low inventories have amplified tight market conditions.
While the market continues to support rising prices, moderation may be in sight. New listings surged in February by 15 per cent to the highest levels since August 2020. Inventories remained low but rose to a five-month high.
At the same time, we anticipate demand to slow as higher interest rates curtail demand. A return to workplaces is likely to reduce purchases in small and mid-sized cities, as well as suburban areas in favour of larger urban markets. The rapid increase in prices in recent months is at risk of retracing, and declining prices would not surprise in the second half of 2022. •
Bryan Yu is chief economist at Central 1 Credit Union.
