Affordability and availability are driving many buyers who would normally be candidates for detached homes to consider townhouses instead. Affordability will, of course, be helped by townhouse prices dropping; but will townhouse prices drop in 2023?
Purchasing a home is still a huge challenge for most residents in Greater Vancouver. At current interest rates, a first time homebuyer earning the media household income of $75,000 will only qualify for a $300,000 mortgage. That’s far short of the benchmark price of $695,000 published by the Real Estate Board of Greater Vancouver. Our hypothetical household would have to save up $395,000 cash to purchase that condo! Short of a very generous gift from the bank of mom and dad, saving this much money is beyond the ability of most households – particularly given how much faster house prices have been rising than savings!
But what about older households who have been saving longer, or more affluent buyers? Consider the data from Statistics Canada:
| Household Income |
% of Population |
Can afford…? |
| $200,000 and over |
12.6% |
Over $850,000 |
| $150,000 – $199,999 |
9.8% |
$620,000-$850,000 |
| $100,000 – $149,999 |
17.8% |
$395,000-$620,000 |
| $50,000-$99,999 |
30.1% |
$165,000-$395,000 |
| Under $50,000 |
29.7% |
< $165,000 |
The price of a “representative” townhouse is over $1 million, meaning that less than 10% of first time buyers can step directly into townhouse ownership.
In the distant past, young families bought a detached home as their “starter”. More recently, young families might have started with a condo, then stepped directly into a detached home. Today, however, the price gap between condos and detached homes is simply too great. Townhouses provide a more affordable, and indeed sustainable, option for families to grow into.
Consider the volume of sales over the past 3 years:
There is a seasonal fluctuation in sales that you have to look past. However, the volume of sales in the same month has been declining for the past 3 years. So will townhouse prices drop in 2023? It’s certainly possible that as sales volumes drop due to affordability issues, the prices may also decline. The wildcard, however, is the level of immigration. The federal government appears determined to increase immigration year after year and since they prefer wealthier immigrants, the supply of new buyers from outside the country may offset the decline in buyers due to affordability.
Are townhouse prices going down? They may, but economists seem to agree that if they do, the decline will be short lived. Consider townhouse prices dropping as a chance to buy into the market at a discount!
