Has Vancouver’s red-hot real estate market finally started to cool?

“There is definitely a slowdown now. I can feel it. I can feel it,” the local real estate agent said, as buyers are taking longer to make decisions.

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Homebuyers are showing less urgency and changing their approach to buying as an economist predicts a rapid rise in interest rates will push prices down in expensive markets like BC.

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“There is definitely a slowdown now. I can feel it. I can feel it,” said Mayur Arora, a real estate agent for One Flat Fee, which has clients in both Metro Vancouver and the Fraser Valley. “Markets are being driven by sentiment and now sentiment is headed towards a slowdown.”

He said there was generally less optimism among potential buyers, leading to hesitation about whether prices could be reduced if there were fewer or no bids.

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“People used to ask, ‘What do I have to do to get this property?’ And now it’s like, “Let’s wait a few days for a price drop and then we can move on.”

“A few weeks ago it was an open house on the weekend and then offers with guaranteed sales on Monday or Tuesday. Now it’s private screenings and greatly reduced open house traffic, with no guarantee of an offer.”

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Arora said the market was primarily reacting to the Bank of Canada’s decision in mid-April to raise its interest rate by half a point to 1 percent. He said the bank intends to make further increases as it works to bring the inflation rate down to a target of 2 percent from 6.7 percent in March.

On Monday, Bank of Canada Governor Tiff Macklem said interest rates could rise another half a percentage point in June to keep inflation in check.

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CONTINUE READING: What Metro Vancouver real estate agents are saying about the housing market

Because of this shift, some economists like RBC Economics’ Robert Hogue are predicting that downward pressure on prices will be stronger in Vancouver and other expensive markets.

In his latest real estate outlook, Hogue predicts that the total home price in BC will fall 3.8 percent to about $1.02 million in 2023. It’s the biggest drop he’s forecasting for provinces across the country, with Ontario showing a 2.3 percent drop.

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Bank rate hikes over the next few months could be 2 percent or slightly above pre-pandemic levels of 1.75 percent, making it the biggest jump in such a short period since a 2005-2006 tightening cycle, according to Hoge.

Stretched buyers will have to get out, and even those who qualify will see the mortgages they can get shrink, he wrote. For middle-income households, the rise in fixed-rate mortgage rates will reduce many buyers’ maximum purchase budgets by about 15 percent, more than offsetting the rise in 2020 and early 2021, when falling interest rates gave buyers more money to work.

Arora said today’s market is definitely fixated on interest rates, but he said: “I bet if tomorrow’s focus is how many immigrants are coming to the lower mainland and how bad the housing shortage is, the market is actually going to have a catch.” Get busy again.”


— with file from Canadian Press

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