What impact will the interest rate hikes have on the Vancouver Real Estate Market in 2022?
Increasing interest rates in Canada will cause the Vancouver real estate market to slow down in 2022. Mortgage interest rates have doubled in recent months. The most expensive homes in Vancouver and British Columbia, in general, are expected to be harder to sell. It’s not all bad news, in every market, there are tons of opportunities for sellers and buyers alike. The hard part will be to find the opportunities that could help benefit buyers and seller in this upcoming market we will have.
Increase mortgage payments for new mortgages:
Current rates have affected buyers’ ability to buy by up to 25%. Even though an average buyer will only see an increase in their payments of $110 per month per $100,000 borrowed based on current rates versus the older rates from a few months ago, the stress test makes it very difficult to qualify for a great mortgage at almost 6% to 7% even though that’s not going to be the buyers’ rates. The increased payment might make it very difficult for a lot of buyers to go ahead an purchase when inflation has hit almost 7% in some areas, and gas prices have gone up by up to 30%. Buyers might cool off from buying unless they see steep discounts.
More Inventory for Buyers
With the number of transactions decreasing for homes in Vancouver this will result in more inventory for buyers. This is a good thing because for the first time in a long time, buyers can have some selection when choosing a home and they can at lease preform their due diligence.
In every down turn, some sellers are also not likely to sell their homes for less than they think their home is worth, which will assist in slowing down the real estate market. The increasing costs to buy a house and higher interest rates will decrease demand as some buyers will have to wait longer to afford a mortgage. There will be less competition for buyers in the real estate market. This is a perfect time for buyers to find their dream home.
Homes Will Sit Longer on the Market
Typically in a down turn market, luxury and higher priced homes get hit the hardest. You’ve heard of the saying “the bigger they are, the harder they fall”. This phrase is true for real estate prices too when it comes to more expensive homes.
Many buyers will be unable to afford spiking mortgage interest rates. All these factors will lead homes available for sale to sit longer on the market; likely, homes will not sell as fast as they did in the past. Over time, we’ll see a decrease in the price of homes as sellers will adjust their rates in relation to current market conditions and become more inline with reality and buyers expectations.
Lower prices are likely in the long run. In every market, you have sellers who need to sell, and sellers who just want to “try” to get the best prices. Sellers will still want to put their homes on the market for what the market USED to be. Eventually, the sellers who need to buy will realize that the cost of buying their next home isn’t as much, and will adjust their prices accordingly. Even if prices decrease somewhat, the difference will be offset by higher interest rates.
Fewer buyers being able to afford homes could make it easier for individuals wanting to downsize. Competition usually heats up for lower priced homes or starter homes with potential of having income suites. Any detached home under 1 million dollar will be very attractive especially for first time homer buyers and investors.
Raised Popularity of Condos
More buyers could be interested in condos as they are more affordable. Condos are also smaller in size, which results in lower prices for the upkeep of the home. In every down turn in the market, there is almost always an upward pressure on condo prices. Especially the starter condos. If you are looking for a condo, our suggestion is to get in sooner than later.
Agents Leaving the Business
Sadly, the great run we had in the Vancouver Real Estate market saw an increase number of real estate agents who got into the business for the wrong reasons; quick profits. Typically we see a 10% to 20% decrease in the number of agents who might leave the real estate business as the number of transactions for homes decreases.
Investors Returning to the market And looking for Deals
On the opposite side of the spectrum, investors will return to the real estate market because more deals will be available and high-interest rates will create opportunities. Especially since rents are still on the rise, investors are still looking for great homes who are prime candidates for rentals. Detached homes with multiple suites are always in demand.
Local Experts Can Help Buy or Sell
Are you an interested buyer or seller concerned with the rising interest rates for the Vancouver real estate market? Do you want to learn how much your home is worth? Call the professionals at 778-881-6781 for a professional, efficient way to find your dream home. You can also visit www.vancouverhousefinders.com.