Real estate market looking strong in 2020

New Year’s Eve has come and gone, along with all the parties and holiday celebrations. Now, as reality settles in, thoughts turn to what we expect in the next 12 months for Greater Vancouver’s housing market.

According to the Royal LePage Market Survey Forecast released in December 2019, on a national level, we will experience higher home prices in 2020, with anticipated increases in condos and detached homes.

Furthermore, the market survey forecast revealed that by the end of 2020, Canadian home prices – resale and new builds – are expected to see healthy appreciation. These anticipated increases will be driven by low single-digit growth in both the condominium and detached-home segments.

Greater Vancouver

In Greater Vancouver, the aggregate price of a home is forecast to increase 1.5 per cent in 2020, rising to $1.125 million. The median price of a standard two-storey home is expected to rise 1.25 per cent year-over-year to $1.46 million while the median price of a condominium is forecast to increase 3.0 per cent to $666,900 by the end of the year.

“Sales have picked up significantly this fall and there is momentum in our market. Buyers who took a ‘wait and see’ approach over the past 18 months are returning to the market looking to buy, confident that price drops have levelled off and may start to escalate,” says Randy Ryalls, managing broker at Royal LePage Sterling Realty, in a press release.

“We are seeing multiple offers for quality listings in high-demand regions, although not to the degree that we saw in 2016.”

Ryalls adds that at the current rate of sales, inventory will be very low going into 2020, putting upward pressure on prices.

“The concern for potential buyers may be that prices will escalate quickly but they should also be concerned that they won’t get the same selection of listings or time to look around,” he says. “It varies between neighbourhoods, but areas such as East Vancouver are a seller’s market.”

Ryalls says that the unemployment rate in Greater Vancouver is low, the west coast economy is performing well, and the cost of borrowing remains low, which will motivate more buyers to come to the market.

Demand drivers

The positive outlook is based on healthy buyer demand. A segment of potential homeowners that put home purchasing on hold beginning in January 2018, due to the introduction of the mortgage stress test, started returning to the market in the second half of 2019, driving competition and demand.

Another significant driver in demand is immigration. According to the Royal LePage Newcomer Survey released in October 2019, newcomers are expected to purchase one in every five homes on the market over the next five years. Newcomers have high consumer confidence in Canadian real estate (86 per cent) and arrive with savings to put towards the purchase of a home (75 per cent).

Peak Millennials drive shift in demand from condominiums to houses

Most of Canada is seeing a shift in demand from condominiums to detached houses as peak Millennials, (between the ages of 26 and 32) seek houses to accommodate growing families. Comparing the national median price of a condominium at the end of 2019 with 2014, the price has increased 48 per cent. Millennials are now looking for more space and a yard. The resulting demand will put upward price pressure on detached homes. However, condominiums will remain in demand in regions where affordability restricts choice of housing types.

“The oldest peak Millennials are now in their 30s,” says Phil Soper, president and CEO at Royal LePage, in a press release. “This huge wave of Canadian consumers has been transforming Canadian real estate for a decade, putting more focus and upward price pressure on our condominium housing stock. … We predict that the period of disproportionately higher price appreciation in the condo segment is drawing to a close as interest in detached homes is reborn.”