Economic theory tells us that when the supply of a product becomes scarce, the price of that product increases. This principle is holding true in Metro Vancouver’s housing market.
As this graph indicates, the supply of detached homes for sale began to decline significantly in early 2014, largely the result of elevated demand, and bottomed out in the middle of 2016. Within that period, detached home prices increased nearly 70 per cent. When the supply of homes began to accumulate in 2017, in tandem with weakening demand, prices levelled off.
This trend is repeating itself in the condominium market today. This graph shows how condominium prices have increased nearly 50 per cent in Metro Vancouver since increased demand caused the inventory of condominiums for sale to fall in May 2015.
"There’s a clear relationship between home seller supply and home price changes in our region today,” Jill Oudil, Real Estate Board of Greater Vancouver president said.
The question that emerges from these trends is, what's driving this demand? Oudil says that the answer likely rests in a variety of factors.
“Our provincial population and economy are growing. Interest rates remain low, the baby boomer generation is downsizing, millennials are entering their household forming years and foreign buyers continue to see Metro Vancouver as a desirable investment. These factors are all supporting housing demand and diminishing housing supply across our region today.”