British Columbia's Property Market Oversupplied? A Closer Look at Three Cities
The British Columbia housing market has long been a bellwether for Canada’s broader real estate trends, with its blend of urban allure, scenic beauty, and economic opportunity. Yet, as affordability concerns persist, a close examination of active listings and months of inventory in Vancouver, Victoria, and Kelowna reveals diverging dynamics across the province’s three major markets. While some areas grapple with supply imbalances, others teeter between the contrasting poles of a buyer’s or seller’s market.
Vancouver: A Tenuous Seller’s Market
Since early spring, active listings have been climbing higher than most Vancouverites are accustomed to.
There have been headlines predicting a buyer’s market—one in which buyers have the upper hand against sellers in purchase negotiations.
Opinion: B.C. building permits soar as Vancouver shifts into buyers’ market – BIV
Has supply (i.e., active listings) increased enough to move the market from a seller's market through balanced market territory and onto a buyer’s market?
For a long time, the property market in Vancouver has been defined by tight supply despite occasional fluctuations. Many industry pundits have said that supply has fallen so far behind population growth that it would be impossible for construction to bring it back to balance. So what’s going on?
However, beneath the surface lies a degree of oversupply hype. Yes, the detached house market is a buyer’s market, but supply is tighter than before the pandemic. The condo apartment market is balanced.
Many factors led to the collapse of demand and an increase in listings.
Even though there is a growing supply in the market at current prices and interest rates, it’s safe to say there is a shortage of housing stock for the current population. The current supply glut would likely disappear if homes became more affordable (i.e., lower home prices and mortgage rates).
Read: Five Factors Driving Property Values in B.C.
What about the effect on prices? Home values in Vancouver have been falling since May 2024, which coincides with the end of the typically busy half of the annual real estate cycle.
Victoria: Balancing the Scales
In Victoria, the capital of British Columbia, listings appear to be accumulating more quickly in Vancouver.
Prices down, sales up: Victoria real estate market shows signs of stability – Saanich News
While months of supply is on the high side, compared to the ten-year average, it’s not even a balanced market.
With around four to five months of inventory, the city is transitioning from a red-hot seller’s market into a softer seller’s market. The flow of new listings has improved in recent months, yet buyers remain cautious amid higher mortgage rates and economic uncertainty.
While this increase in inventory is slowly relieving price pressures, Victoria’s market remains competitive. Theoretically, sellers can still command premiums, but properties are taking slightly longer to sell, with buyers increasingly negotiating prices.
Even though it is a seller’s market, price growth has stalled, and in many cases, prices are falling. The balance has not yet tipped fully into a balanced market, but it is inching closer. Perhaps, during the pandemic, prices outran the market.
Victoria's market dynamics are driven, in part, by a steady stream of retirees and professionals seeking more affordable alternatives to Vancouver.
However, there is a risk that when Baby Boomers finally downsize or “right-size” their homes, they could create a demographic bulge of supply in the detached house market (i.e., the top of the market). 31 percent of the population of Metro Victoria is over 60 years of age.
Read: Who will buy Baby Boomers’ Homes?
Okanagan: The Buyer’s Market Emerges
On the surface, the Okanagan Valley presents a very similar different picture. Recent data points to rising active listing levels. Again the headlines scream that it’s a buyer’s market.
Kelowna experiencing buyer’s market as real estate listings increase – Global News
There’s no doubt that demand has dropped dramatically. The lowest in a decade.
Even though demand has plummeted, Kelowna has lower unemployment than most cities in Canada. The Economic fundamentals are relatively strong.
Recent data points to rising inventory levels, with the region boasting more than nine months of supply—marking a definitive shift into buyer's market territory.
Could this shift be attributed to a surge in new construction? Some commentators believe that, particularly in the condo and townhouse segments, there is a glut on the market where developers sought to capitalize on the pandemic-driven urban exodus to lifestyle regions like Kelowna.
This seems to be an unlikely explanation because:
New construction is overweight toward condo apartments, and there is higher supply in the detached house market.
Housing completions have slowed in 2024.
The more likely explanation is high prices; the Benchmark price of a house in the Central Okanagan (near Kelowna) was $1 million in September. The Okanagan is barely more affordable than Vancouver. In comparison, the Benchmark price of a house in Calgary, is $725,000.
While some oversupply concerns are justified, the narrative of an impending glut is somewhat overstated. Kelowna’s long-term growth prospects remain solid, buoyed by its growing reputation as a tech hub and destination for remote workers. However, supply appears to have outpaced demand in the short term, creating ripe conditions for buyers to negotiate.
The Price Equation: Hype vs. Reality
Despite differing supply conditions, home prices across all three cities remain high by historical standards. According to the Teranet-National Bank House Price Index, Vancouver prices are at all-time highs, Victoria prices are down 4.4% from the May 2022 peak, and Kelowna’s property values are down 6.3% from the July 2022 peak.
While price growth has softened, it has not reversed meaningfully. The persistent narrative of an oversupply crash in these markets is largely hype, grounded more in wishful thinking than economic fundamentals. This doesn’t mean that a major correction is impossible – it simply means that current data doesn’t indicate a correction is very likely.
On balance, the Okanagan is at the highest risk of a price correction. Home values there have been volatile, and the sudden shift to a buyer’s market combined with historically high mortgage rates could tip the scales.
Yet, the extent of this correction is unlikely to match the dramatic expectations of some market watchers. Kelowna's underlying demand remains robust enough to absorb much of the current oversupply, though buyers may benefit from a temporary reprieve in prices.
Structural Limits Keep Pressure on Prices
Talk of oversupply in British Columbia’s housing market remains largely overstated. Structural constraints—geographical, regulatory, and political—have kept a firm lid on significant new supply, leaving these markets vulnerable to demand-side shocks but largely insulated from an oversupply-driven downturn.
However, recent government policy changes could alleviate a key structural constraint. The B.C. government has passed regulations into law that require municipalities with at least 5,000 residents to change their zoning bylaws to allow four to six units on a standard lot by June 30, 2024. The legislation is intended to increase housing density and the supply of triplexes, townhouses, and row homes across the province. This is significant because small and family-owned builders or developers can greatly increase the province’s capacity to build more housing stock. When density was restricted to highrises, large corporate developers typically undertook projects, and building permit approval timelines took years. Under the new law, small and nimble builders will jump into the fray, adding supply and competition.
B.C. grants extensions to 21 communities to pass new housing density bylaws – Vancouver Sun
Of course, the tight supply conditions that have defined British Columbia’s residential property market in recent years will likely continue to prop up prices, albeit at a slower growth rate. Buyers hoping for a major price correction may find themselves waiting in vain.
However, the structural changes set in motion by the provincial government may lead to several decades of rapidly growing supply. Housing stock might conceivably grow to the point where there are enough homes for the population living in the province, and anybody who wants to buy a house can. If British Columbia were to become a market of plentiful supply, then structural supply shortages would be one less leg of support propping up prices.
