Ryan Garner (Market News) - Metro Vancouver strengthened its status as one of Canada’s hottest housing markets in 2021, with record-breaking sales totals and home prices reaching all-time highs.

The Real Estate Board of Greater Vancouver (REBGV) recorded a total of 41,311 residential home transactions across all property types by the end of November, far exceeding the 30,944 properties that traded hands during 2020. The latest figures translate to an average of 3,755 sales per month in 2021, eclipsing last year’s monthly average of 2,578.

The seeds of Vancouver’s torrid sales pace were planted at the start of the pandemic. Uncertainty surrounding COVID-19 caused a slowdown in March 2020, but shifting housing needs and historically low interest rates ramped up real estate transactions during the second half of the year.
Demand remained high heading into 2021, although January’s sales total (2,389) turned out to be the lowest of the year by a significant margin, as no other month saw transactions dip below 3,100.

Vancouver home sales, listings spiked in the spring
A surge of spring activity saw sales peak at 5,708 in March, the highest monthly transaction total ever recorded in Metro Vancouver. Those record-setting numbers kicked off a three-month buying binge that saw 14,884 properties trade hands between March and June.

Sales were spurred by increased household savings resulting from pandemic lockdowns, as well as homeowners who saw their property values increase and looked to either move up in the market or relocate to suburban areas.

Listings also entered record-breaking territory during the spring, with homes hitting the market at a higher rate than Vancouver had ever seen before.

However, buyer demand swallowed up the new supply before it could accumulate. For example, Vancouver properties averaged less than 20 days on the market during the month of May, reflecting the region’s insatiable demand.

A summer lull saw both sales and listings recede after the spring frenzy, while fewer bidding wars caused prices to stabilize after surging during the first half of 2021. Sales totals hit an eight-month low in September (3,149) before rebounding in the fall, with unseasonably high activity causing prices to inch higher as the year comes to a close.

Vancouver’s average home price hits $1.2 million mark
At the start of 2021, the benchmark price for all property types in Metro Vancouver was $1,047,400. Prices have increased during each month of 2021, with the benchmark rising to $1,211,200 by December, representing a year-to-date increase of 14.6 per cent.

Looking at Metro Vancouver’s housing segments, single detached homes have attracted the lion’s share of both buyer demand and bidding wars during 2021. As of December, the average detached home price sits at $1.87 million, jumping 20.2 per cent from the start of the year.

Year-to-date, attached home prices have increased 21.6 per cent to reach an average of $990,300, while apartment homes hit a benchmark of $752,800 by December, representing an 11.2 per cent increase.

Apartments were the only Metro Vancouver housing segment to experience any softening during 2021, with benchmark prices dipping slightly in June ($736,900) and July ($735,100) before rebounding toward the end of the year.

Supply issues persist heading into 2022
While prices keep rising, inventory in the region has plummeted at the tail end of 2021, contributing to the tight housing market. As of December there were a total number of 7,144 homes listed on Metro Vancouver’s MLS system, a 35.7 per cent decrease compared to December 2020 (11,118).

Policy makers have been tasked with finding solutions to increase housing supply, although there aren’t any easy answers. According to REBGV economist Keith Stewart, “it’s critical that this supply crunch remains the focus for addressing the housing affordability challenges in our region.”
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Interest rate hikes are expected to eventually ease demand, but Vancouver is in a unique situation because of its geographical constraints and steady population growth caused by both immigration and interprovincial migration. Those factors, as well as economic recovery and rising consumer confidence, should continue to motivate buyers and boost prices in the new year.

The emerging direction of the densification strategy calls for increasing Central Broadway’s population by up to 50,000 to about 128,000 residents — an increase of 64% compared to 78,000 residents today. This would be achieved by growing the number of homes in the area from over 60,000 today to up to 90,000 units, with much of this is intended to be more affordable forms of housing.

Added office, retail, restaurant, institutional, and creative industrial spaces would grow the number of jobs from 84,400 today to up to about 126,000 jobs.

These residential and employment targets through redevelopment are for the next 30 years through 2050.

As can be expected, the new tallest building allowances will be in the “Centre” areas within the immediate area of the six new subway stations. Tower heights of generally between 30 and 40 storeys can be expected in the station areas, complete with a mix of uses including active retail and restaurant space frontage on the ground level, creating vibrant areas around the station entrances.

Shoulder areas next to the immediate area of the stations — generally within a two or three block radius — will see height allowances of 20 to 30 storeys, also with active commercial uses at street level.

​Areas classified as “villages” include the retail strips of West 4th Avenue (within Kitsilano), Granville Street (south of 10th Avenue), and Main Street (south of 7th Avenue) within the corridor. These areas will see incremental changes with building heights of four to six storeys to reduce redevelopment pressures on existing businesses, with new developments required to provide replacement commercial uses on the ground level.

Outside of these areas, existing apartment zones would see new density and height allowances, potentially towers, for new additional purpose-built rental housing in a manner that replaces aging rental buildings and allows existing residents to remain in their neighbourhood.

Existing low-density zoning, including areas currently dominated by single-family homes, will see new six-storey market rental buildings, and allowances for 12 to 18-storey towers with below-market rental homes in strategic locations.

Here are some major highlights for possible area specific allowances:

• Towers between 20 and 40 storeys for rentals and condos, office space, and amenities:
  • Granville/Burrard Slopes (roughly framed by 10th Avenue to the south, Burrard Street to the east, 1st Avenue to the north, and Hemlock Street to the east)
  • The tallest buildings within the Central Broadway Plan will be found near the future South Granville Station, partially because it lacks view cone height restrictions.
• Towers between 25 and 35 storeys for offices or rental housing:
  • Creative District (roughly along Great Northern Way, near VCC-Clark Station and the future Great Northern Way-Emily Carr Station)
• Towers between 20 and 30 storeys for rental, social, condos, and offices:
  • Mount Pleasant Centre (along Main Street from 1st Avenue to 7th Avenue, and along Kingsway from Main Street to 16th Avenue)
• Towers between 20 and 30 storeys for rentals and offices:
  • Broadway Area Shoulder West (along Broadway between Hemlock Street and Oak Street)
• Towers between 15 and 20+ storeys for rentals or offices:
  • Broadway Shoulder Area East (along Broadway between Yukon Street and Quebec Street)
• Towers between 12 and 25 storeys for the renewal and expansion of older rental, social, and co-op housing:
  • Kitsilano North (between 1st Avenue and 8th Avenue)
  • Mount Pleasant South Apartment Area (generally in the areas east and west of the Main Street strip south of Broadway)
  • Mount Pleasant North Apartment Area (roughly framed by Great Northern Way to the north, Clark Drive to the east, 10th Avenue and Broadway to the south, and Sophia Street to the west)
• Towers between 12 and 15 storeys for projects with at least 20% social housing and/or community amenities:
  • North of Broadway within the Granville/Burrard Slopes area
  • Fairview South (roughly framed by Burrard Street to the west, 10th Avenue to the north Oak Street to the east, and 16th Avenue to the south)
• Buildings between six and 15 storeys for renewal and expansion of older rental, social, and co-op housing:
  • Fairview Slopes (roughly framed by Hemlock Street to the west, 6th Avenue to the north, Ash Street to the east, and 8th Avenue to the south)
  • Uptown South (roughly framed by 12th Avenue to the north, Oak Street to the west, 16th Avenue to the south, and Cambie Street to the east)

Of special note is the formal establishment of Vancouver’s second downtown area within the area named Uptown/Cambie North — roughly framed by 1st Avenue to the north, Yukon Street to the east. 13th Avenue to the south, and Oak Street to the west.

Uptown/Cambie North is served by the existing Olympic Village Station, and the future Oak-VGH and Broadway-City Hall stations, and the area is anchored by the Vancouver General Hospital health precinct and BC Cancer, which will expand over the long term. The municipal government also has plans to build a new city hall on the block it owns immediately south of the existing city hall, where the Broadway-City Hall entrance building is located. Office, hotel, and other commercial developments will be prioritized across Uptown/Cambie North, with relatively minimal residential development, apart from some considerations for rental housing in some areas.

Although Uptown/Cambie North would have city centre designation, it would have lower height limits of between six and about 15 storeys due to a combination of mountain height view cones and the hospital helipad’s flight path.

Existing industrial areas within the Central Broadway corridor are primarily located within Mount Pleasant. These areas would see intensified light/creative industrial and office uses, along with the introduction of retail/restaurant businesses and amenities to serve the growing number of workers in the area.

The proposed directions for the Broadway Plan also calls for expanded and improved public parks and open spaces, community and recreational amenities, and improved walking and cycling infrastructure. This includes narrowing much of Broadway into four travel lanes (two lanes in each direction) to accommodate wider sidewalks, restaurant patios, and other public spaces for a more vibrant streetscape.

An online survey is available through November 30, 2021. Feedback will be used to create the final draft Broadway Plan, which will be reviewed in the final round of public consultation in the first quarter of 2022 before the plan is considered for approval by city council in the second quarter.
Construction on the subway began earlier this year, and it is slated to open in 2025. Upon opening, it is expected to see 130,000 boardings daily.

DANIEL FOCH (BETTER DWELLING) - It’s time to take off the training wheels for Canada’s economy, which is now looking overstimulated. That’s the take from BMO‘s Douglas Porter, who sees stimulus coming to an end as early as this week. The Bank of Canada (BoC) is increasingly looking out of touch with reality. BMO, amongst others, now sees no justification for the level of stimulus the central bank is using.

The Bank Of Canada Is Out Of Step With Housing And The Economy
The Canadian economy hasn’t recovered to its pre-pandemic glory, but it’s not far off either. While it needs help to grow, it doesn’t need this much help from the central bank. Canada’s outlook doesn’t look nearly as bad as it did at the beginning of the pandemic. However, little has changed in terms of the stimulus it’s receiving. 

Programs like quantitative ease (QE) are still used to suppress borrowing rates. The overnight rate is already next to zero (0.25%), but the central bank is driving borrowing costs even lower. By driving down rates, they’re hoping to stimulate even more demand for goods. If demand for goods runs too high, the stimulus becomes inflationary. No one wins when inflation is elevated, since it consumes extra income, but not more goods.

It’s tough to argue for more stimulus with record home and stock prices, and high inflation. Promoting more stimulus would be arguing for higher inflation at this point.

“… [the BoC’s] current ultra-stimulative policies look far out of step with red-hot housing, record equity markets, decades-high inflation, and employment back at pre-pandemic levels,” said Porter. 

The Market Expects The Bank Of Canada To Hike 4x Next Year
Whatever the BoC is selling, public markets aren’t buying. Porter said the market is pricing in four rate hikes next year. This can push the overnight rate up to 100 bps higher than its current level. Does that seem realistic? Who knows, and these expectations are volatile in such an uncertain market. The takeaway is the gap between the market’s expectations and the BoC’s narrative. 

Earlier this year, the central bank didn’t expect to hike rates until 2023. They’ve since pulled forward expectations, but only expect one hike next year. “We suspect they push back modestly,” he said. 

The BoC Has No Justification For Stimulus, Will End QE Soon
Let’s circle back to QE. This is the process by which a central bank buys government bonds to drive down yields. By pushing down yields on government bonds, they drive the cost of borrowing lower for all credit. This is most obviously seen by consumers through mortgage rates, which are now negative in real terms. It’s a tool used by central banks to drive inflation higher, when interest rates are close to zero. It acts as a cut to interest rates, without cutting interest rates further.

Canada started the pandemic with an arbitrary number, and it’s only been cut by half. We say arbitrary because the BoC estimates it takes 12 to 18 months for monetary policy to fully hit the market. At the beginning of the pandemic, they decided $4 billion per week was the right number, even with a triple rate cut. They’ve only now seen the full impact of the rate cut, and QE is still at $2 billion per week. BMO sees the central bank turning off the taps to this liquidity soon.

“…There simply is no justification for such extreme stimulus at this point. QE was unleashed at a time of emergency—there is no emergency now,” said Porter.

He further points to the Federal government’s actions over the past week. Wage and labor support programs such as CEWS and CRB now have an end date. In the bank’s opinion, this sends the message that the time for extraordinary support is over.
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The Canadian economy is still on course to recover, but it needs time more than stimulus. RBC , Desjardins, and National Bank of Canada also now disagree with the BoC guidance on rates. The central bank is fighting an uphill battle. They need to balance their credibility and market expectations. They can keep saying the market needs stimulus and inflation is transitory. But at this point, who believes them?