Buyers in Metro Vancouver are opting for higher density housing types and different locations as they navigate a continually low supply and high demand spring market.
One of the first things buyers are compromising on is the density of their future home. Instead of aiming for a single-family home, they are opting for condos or townhouses, according to Jesse Klein, a real estate agent with Sutton Group - West Coast Realty.
“Everybody treats it a little bit differently based on your preferences, but buyers are having to adjust for sure,” he said, adding that it is also common to see buyers decreasing their preference for the number of bedrooms.
Single-family homes remain the top choice for housing type among Canadian buyers, despite some opting for higher-density homes. Sixty-two per cent of buyers nationally prefer single-family homes, compared to 20 per cent who prefer condos or apartments and 10 per cent who prefer townhomes, according to an annual survey by real estate marketplace Zolo.
Across Canada, 68 per cent of buyers say they are rethinking their focus on a specific location. In addition, 72 per cent percent of Canadians note that changes in the broader economy have influenced their home-buying plans, according to a May report from Re/Max Canada.
The Bank of Canada ended their pause on rate hikes on June 7 when it raised the key interest rate 25 basis points to 4.75 per cent, the highest it’s been since 2001. The rate hike comes at a time when the housing market is seeing a renewal in activity, increases in prices and low supply.
"Back in January, few people would have predicted prices to be up as much as they are – ourselves included. Our forecast projected prices to be up modestly in 2023 by about two per cent at year-end. Instead, Metro Vancouver home prices are already up about six per cent or more across all home types at the midway point of the year,” said Andrew Lis, director of economics and data analytics with the Real Estate Board of Greater Vancouver, in a media statement.
The result is buyers rethinking their definition of “must-haves” versus “nice-to-haves,” according to Re/Max.
As prices continue to appreciate, 66 percent of Canadians think the housing market is moving faster than they could make an offer, with half of Canadian homebuyers buying residential properties “to alleviate fears around the unknown,” the report said.
“I saw a lot of people this spring say, ‘Oh, man, this is happening again. Forget it, rates are high enough. There's no selection out there and the economy's teetering,’” Klein said. “But then other people just went ‘OK, do I want this place this year? The direction right now is up, so I might as well just buy something now’ ... It depends on the person but I saw a lot of both.”
Tim Hill, a real estate agent with Re/Max All Points Realty, said that the “fear of missing out” buying has tapered since the pandemic.
“I feel like this market came so fast and heavy that people haven't really had time to think about it,” he said.
Another big compromise people are making is their preferred location. Klein is seeing buyers opt for different neighbourhoods that may be considered less desirable but have lower prices. However, prices are appreciating in these areas too.
“The percentage gap between nice neighbourhoods and traditionally rougher neighbourhoods has closed,” he said. “As areas get more expensive, the lower end neighbourhoods tend to get lifted up … a lot more than the higher-end neighbourhoods.”
A typically south Surrey home in 2016 would sell for roughly $3 million, he said. A comparable home or lot located a 12-minute drive away in the Cloverdale area would be roughly half this price. Now, the home worth $3 million has stayed roughly the same price while the Cloverdale home has increased by approximately $1 million.
“We're seeing lower end areas get lifted up quite a bit versus traditionally nicer neighbourhoods who haven't really seen the same gains,” Klein said.
Hill said that it is common to see people compromise on location in markets with high activity and demand, in addition to the gap in pricing closing.