Would-be buyers, sellers of Vancouver luxury real estate sitting on sidelines: report

Rising interest rates, inflationary pressure and widespread economic uncertainty are cooling the luxury real estate market in Vancouver, according to a new report.

Sotheby's International Realty Canada has found that high-end buyers and sellers alike are opting to sit on the sidelines in the country's major cities, causing both demand and supply to dry up.

"Canada’s conventional and luxury real estate markets are undergoing a long-awaited transition after an era of over-exuberance during the pandemic, particularly in those regions that saw the most acceleration over the past two years," said Don Kottick, president and CEO, in a news release summarizing the report's findings.

"The market is still absorbing the effects of rapid-fire interest rate hikes, as well as changes in the domestic and global economic landscape, and real estate sellers and buyers are taking a step back to strategize.”

In Vancouver, sales of residential properties listed for more than $4 million saw a 51 per cent year-over-year decline in July and August, and a 58 per cent drop in September. The report, however, characterized last year's activity as "unsustainable," "frenetic," and "exceptionally exuberant," and described the decline as an indication that this segment of the market is normalizing.

The city remains, the report says, one where the housing market is beset by "affordability challenges," which have been exacerbated as the cost of living continues to climb. However, even those looking to buy or sell multi-million-dollar properties are being deterred by rising interest rates and inflation.

"Despite the greater financial resilience of luxury and ultra-luxury buyers and investors to absorb the impact of rising interest rates and inflationary pressures, many have temporarily positioned themselves on the sidelines in anticipation of future price declines," it reads.

"At the same time, the reluctance of many sellers to list and sell properties at appropriate prices for new market realities has resulted in what is widely regarded as a temporary period during which price and activity stickiness will prevail as buyers and sellers adjust to new norms."

The full report is available online.