Housing Supply Crisis Could Go On For Years

The Vancouver Life Real Estate Podcast

The Vancouver real estate market, is facing a persistent and thorny challenge with low inventory that shows no signs of abating. This week week we delve into the factors contributing to the prolonged shortage of housing in Vancouver, exploring the implications for potential buyers in the marketplace.
Currently, the Vancouver market requires an influx of approximately 60% more inventory to achieve a balanced and sustained state. However, the phenomenon of low inventory is not a recent development here; it has been a consistent feature of the Vancouver real estate landscape over the past two decades. The city has experienced a sustained buyers' market only two times in the last two decades – during the Global Financial Crisis (GFC) and in 2012 for a combined total of 14 months. Interestingly, these downturns were not primarily due to a surge in listings but rather a decrease in buyer activity.
The construction industry, the tip of the proverbial real estate spear, is showing a concerning downturn. Immigration, which was anticipated to boost the sector, has not produced the desired effects. Last month alone, the industry lost 44,000 jobs, marking a 4% decline over the past three months. The last time we saw a slump like this was during the Global Financial Crisis and the early 90s recession. Moreover, the residential building permits have plummeted, reaching the lowest level in over a decade.
Shifting focus to overall unemployment, there’s more to worry about. The unemployment rate has surged to 5.5% in the last month, increasing by 50 bps in just 3 months. Such an escalation is seldom observed outside of recessions. Also, the accuracy of these statistics should be questioned due to rapid population growth over the past year, potentially leading to an underestimation of the unemployment rate. Notable job cuts by Telus, RBC, and BMO area adding to the economic concerns.
The topic of affordability also presents a gloomy picture. The 5-year bond rate has surpassed 4.1%, reaching a 15-year high. This has consequently driven up fixed rates by 12 basis points in a week, making homeownership even more unattainable. The affordability crisis has reached such an extent that even individuals earning over $100,000 per year are seeking assistance from organizations like Habitat for Humanity to secure rental units or purchase homes!
How does this compare to Canada’s other major market in Toronto? Join this weeks podcast and get the whole story!

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