After two years of interest-rate shocks and stalled transactions, Vancouver’s housing market is entering a new phase. It is neither a boom nor a collapse. What comes next is likely to be shaped less by sentiment and more by fundamentals that change slowly and can be measured.

The market is often discussed through headlines about prices or policy announcements. Those signals matter, but they do not always explain how housing cycles turn. In Vancouver, outcomes are driven by a narrow set of forces. Population growth and household formation determine demand. Construction timelines determine how quickly supply arrives. Mortgage payments determine how much of that demand can turn into transactions.

Recent data points to adjustment rather than correction. Sales volumes remain below long-term averages. Inventory has increased, though unevenly across segments. Rents remain firm, supporting demand even as affordability limits purchasing power.

Understanding Vancouver’s next housing cycle requires stepping back from forecasts and focusing on these fundamentals. They offer a clearer view of where the market is heading and why change, when it comes, is likely to be gradual rather than dramatic.

What A Housing Cycle Means?

Housing cycles are often described as price cycles. That framing is incomplete. Prices are an outcome. The cycle itself is defined by changes in activity, availability and the ability of households to transact.

In Vancouver, early signals of a turning cycle appear in sales volumes, new listings and rental conditions. Prices tend to follow with a delay. Construction responds later still. This sequencing helps explain why markets can feel stagnant even as underlying conditions begin to shift.

The current phase is best described as an adjustment. Home sales across Metro Vancouver fell 10.4% in 2025, posting the lowest annual total in more than 20 years, according to Greater Vancouver Realtors.

Inventory has increased from post-pandemic lows, but not to levels typically associated with broad price corrections. Vacancy has risen from the extreme tightness of recent years, though lower-cost units remain highly competitive, based on Canada Mortgage and Housing Corp. data. Demand has not disappeared, but affordability has constrained how much of it can act.

The next cycle is therefore unlikely to resemble past boom-and-bust patterns. It is more likely to unfold through gradual changes in who can buy, what gets built and how long supply takes to reach the market.

Demand and Households

Demand in Vancouver’s housing market begins with population growth, but household formation determines how many homes are needed. The two are related, but not the same.

Canada experienced strong population growth earlier in the decade, driven largely by immigration and non-permanent residents, though recent restrictions have slowed, and in some periods reversed, net growth in British Columbia. Even so, the population base remains larger than it was before the pandemic.

Much of that growth has entered the rental market rather than ownership. New arrivals often rent, share housing or delay purchasing. This has tightened rental conditions even as resale activity slowed.

Using conservative assumptions based on census household size, even modest net population growth implies continued household formation. That demand does not disappear when interest rates rise. It shifts. Ownership demand is deferred, while rental demand increases. Pressure builds in segments that respond slowly.

This dynamic helps explain why Vancouver has avoided sharp price corrections. Demand has been constrained by financing rather than demographics. The market has adjusted through lower transaction volumes rather than widespread price declines.

Ownership structure also matters. A large share of households hold fixed-rate mortgages originated before rates peaked. Bank of Canada analysis suggests this has reduced forced selling and limited downside pressure on prices. At the same time, higher monthly payments restrict new buyers and narrow the entry point into ownership.

Demand remains present, but access is limited. Any future easing in borrowing conditions is therefore more likely to release pent-up demand than to create new demand.

Supply Moves Slowly

In Vancouver, supply does not respond quickly to changes in demand. This has been a defining feature of recent housing cycles and remains true today.

Housing starts are often cited as evidence that supply is improving. According to CMHC, construction activity across the region has remained active. But starts are only the first step. What matters is when homes are completed and delivered. That process can take several years, particularly for multi-family projects, which now account for a large share of new construction.

The gap between starts and completions helps explain why supply pressure persists even during slower sales periods. Projects launched under very different financing assumptions are now working through higher borrowing costs, construction inflation and tighter pre-sale requirements. Timelines have stretched, and some projects have been delayed or paused.

Financing conditions play a central role. Higher interest rates affect developers differently than homebuyers. Construction loans reprice quickly. Equity requirements rise. Lenders demand stronger pre-sale coverage. Even as policy rates stabilize, the cost of capital for new projects remains materially higher than earlier in the cycle.

Approval timelines add another layer of friction. While details vary by municipality, the effect is similar across the region: supply arrives with a lag. That lag limits how quickly the market can respond to shifts in demand.

The result is a supply pipeline that appears larger on paper than in practice. Delivery remains uneven by location and housing type. Purpose-built rental has expanded, but ownership-oriented supply has been slower to materialize, particularly at price points accessible to first-time buyers.

Affordability Sets The Ceiling

If demand explains why pressure persists and supply explains why it is slow to ease, affordability explains why activity remains subdued. In Vancouver, affordability is a monthly calculation.

Higher interest rates have raised borrowing costs sharply. Even as prices have eased, mortgage payments for new buyers remain well above pre-pandemic levels. Bank of Canada data shows household debt-servicing ratios have risen, particularly for newer borrowers. Purchasing power has declined across most segments.

What matters for the cycle is not whether rates fall modestly, but whether monthly payments fall enough to bring more households back into the market. So far, that adjustment has been limited.

This divide shapes behaviour. Existing owners have little incentive to sell unless forced. Carrying costs remain manageable for many households, keeping listings growth measured. At the same time, buyers relying on new financing face tighter qualification and higher payments, slowing absorption even as inventory rises.

Affordability also feeds back into supply. Developers depend on end buyers to absorb new units. When buyers struggle to qualify, projects take longer to sell, financing conditions tighten and future construction slows.

As ownership becomes harder to access, households remain renters for longer. Vacancy rates have risen but remain competitive in lower-cost segments. Rent growth has moderated, but demand continues to exceed supply.

Without meaningful relief in monthly payment costs, any recovery in activity is likely to be gradual.

What The Data is Showing?

Prices draw attention, but activity and availability often provide clearer signals.

Benchmark prices have eased but not collapsed. The composite benchmark was down 4.5% year over year in December, according to GVR. The market is not clearing through sharp price moves, but through reduced turnover.

Inventory has increased from pandemic-era lows. The sales-to-active listings ratio last month was 12.7% across all property types. According to GVR, sustained downward pressure on prices typically emerges when the ratio falls below 12%.

Supply has risen more in higher-priced segments, while entry-level and family-oriented housing remains relatively scarce.

Taken together, the data points to gradual rebalancing rather than reversal.

What This Means?

Vancouver’s next housing cycle will be driven less by headlines and more by constraints that are already visible. Demand remains supported by household formation, but new supply arrives slowly. Monthly payments, not asking prices, determine who can actually buy.

For investors, this is a market that rewards patience and conservative assumptions. Cash flow matters more than timing a rebound. Rental demand remains strongest in well-located, lower-priced segments where alternatives are limited. Deals that rely on near-term price appreciation are harder to justify than those that work under steady rents and cautious financing.

For policymakers and business leaders, the message is familiar. Housing systems adjust over years, not quarters. Changes in interest rates, zoning or incentives take time to move through household balance sheets and construction pipelines.

Vancouver’s housing market is not broken, but it is tightly constrained. It releases pressure through slower sales, delayed projects and deferred decisions rather than sharp corrections. For anyone making decisions today, the fundamentals offer more useful guidance than forecasts or headlines.

Opinion : Inside Vancouver’s Next Housing Cycle – Demand, Supply & Affordability by Rooz Allahyari | REM Real Estate Magazine