How a shortage of homes is driving up prices
For decades, Metro Vancouver, and all of Canada for that matter, has not been building enough homes. Our population keeps growing (which is good), but the number of homes we build to house people hasn’t kept up. A shortage of housing supply combined with high demand means that the value of the homes that do exist go up in price.
The pandemic highlighted our housing shortage thanks to several factors. Many people wanted to move because their needs changed (e.g. they needed more space because they were now working from home, or they wanted to move to be closer to family). Many saved money because they couldn’t spend it on other things (like vacations), so they had more to spend on housing. And the low interest rate environment, which encouraged spending to help the economy rebound, also helped to offset those higher prices and make mortgages more affordable. These factors combined resulted in rapidly rising home prices.
Now with interest rates rising, the flurry of activity has cooled. But that doesn’t mean that people no longer need homes, nor does it mean housing is now more affordable. House price growth has slowed, but buyers can’t afford as much due to higher interest rates. When people can’t afford to buy their first home, they stay in rental units. Then there are more people who want or need to rent than there are vacancies. And that’s when we see rental prices starting to go up.
It’s all connected. We need more homes, of all types.