[04.27.2024 - 05.03.2024] Weekly Real Estate Review: Vancouver and Canada Markets

This week, we highlight four significant topics: an increase in home sales and listings in Vancouver despite high borrowing costs; the rising trend of co-ownership among young homeowners in B.C.; the effects of the capital gains tax increase on Canadian investors; and the Bank of Canada's approach to reducing interest rates as inflation begins to stabilize.

Vancouver Home Sales and Listings See Uptick Amid High Borrowing Costs

In April, home sales in Greater Vancouver saw a slight increase of 3.3% from the previous year, with 2,831 homes sold, although this figure remains below the decade average for the month. Meanwhile, the number of homes listed for sale surged significantly by 42.1% year-over-year to 12,491, surpassing the 12,000 mark for the first time since summer 2020. This rise in inventory is 16.7% above the ten-year seasonal average. The composite benchmark home price also increased to $1,205,800, marking a 2.8% rise from last year and a 0.8% increase from March. According to Andrew Lis, the board's director of economics and data analytics, the robust demand and resilience of homeowners against high borrowing rates have come as a surprise to many.

Co-Ownership Popular Among Young B.C. Homeowners

A Statistics Canada report reveals that 20% of B.C. homeowners born in the 1990s co-own homes with their parents, particularly in high-cost areas like Vancouver, Victoria, and Abbotsford-Mission. This trend, driven by the financial support of parents, helps younger generations afford homes in expensive markets. Real estate lawyer Richard Bell notes a significant rise in interest for co-ownership arrangements among families, especially Baby Boomers aiding their children.

Capital Gains Tax Hike Impacts Canadian Investors

Analysts from CIBC Capital Markets warn that the recent capital gains tax increase announced in Ottawa will significantly affect Canadian investors, particularly impacting stocks in banking, energy, and communications sectors. These sectors, which are crucial for retirees due to their high dividend yields, account for half of the S&P/TSX earnings over the past decade. The tax hike will raise the capital gains inclusion rate from 50% to two-thirds for gains exceeding $250,000, potentially lowering corporate profitability and return on equity. This move follows other government measures, including a 1.5% income surtax on banks and insurers introduced last year, and various regulatory changes that could further strain profits in these key industries.

Bank of Canada Nears Interest Rate Cut as Inflation Eases

Bank of Canada Governor Tiff Macklem indicated that interest rate cuts are likely soon, as sustained reductions in inflation are observed. Speaking to a House of Commons finance committee, he noted improved core inflation, stabilized wages, and a cooler labor market. These conditions, along with stalled economic growth, have reduced inflationary pressures. Macklem emphasized a cautious approach to rate cuts, stating they would be gradual and not revert to pre-pandemic lows. The next review of rates is scheduled for June 5, offering potential relief for homeowners facing high borrowing costs.