After years of soaring prices and new builds, Metro Vancouver’s condo market is showing signs of strain with projects stalling, sales declining, and developers hitting pause.
Industry experts say it’s the result of a “perfect storm” of four major forces converging: high interest rates and softening rental income, reduced foreign capital and lower immigration — all of which have created a challenging environment for both buyers and builders.
“[We] are at a breaking point, the industry is doing terribly,” said Anne McMullin, CEO of the Urban Development Institute.
“It’s not just that the industry is struggling; it’s our inability to deliver homes that people can afford.”
Rising interest rates, declining rent
Increase in borrowing costs has reduced affordability for buyers and made it more expensive for developers to finance new builds, says McMullin.
Just five years ago, mortgage rates were near historic lows, making it relatively affordable for buyers to borrow large sums and invest in real estate. But those rates have climbed significantly, pushing up monthly mortgage payments.
Surrey city council has approved changes to development applications for converting hundreds of condo units into rental units. As Pinki Wong reports, some real estate advisers think the shift will mean fewer homes for younger generations to purchase down the road.
The result is higher “carrying costs” — the total expense of owning a condo, including mortgage payments, property taxes and maintenance fees.
The City of Vancouver’s 2025 budget includes a 3.9 per cent property tax increase and an 18.2 per cent hike in utility fees, together adding hundreds of dollars to annual expenses.
“It costs more to build a unit or a home than the average person in the Lower Mainland can afford,” said McMullin.
“When it’s costing more to build … we see project cancellations and we start to see projects not going ahead.”
At the same time, condo and rental price growth has stagnated, which means homeowners can no longer count on steady price growth to absorb the costs.
According to the latest housing market update from the B.C. Real Estate Association, residential prices in the province in May 2025 were down 4.2 per cent at $959,058 compared to the same time last year, while residential sales were down 13.5 per cent.
In Vancouver, average asking rents for a two-bedroom fell from $3,440 in 2024 to $3,170 in 2025, according to the latest figures from Statistics Canada.
Though economists expect rates to begin to decline slightly in the second half of the year, persistent inflation risks and ongoing U.S. trade tensions could keep borrowing costs elevated for now.
Decline in foreign capital and immigration levels
A second factor cooling B.C.’s condo market is the decline in foreign investment, largely due to the federal ban on non-residents purchasing residential property in Canada.
Initially enacted in January 2023 under the Prohibition on the Purchase of Residential Property by Non-Canadians Act, the ban was recently extended by two more years and is now set to expire on Jan. 1, 2027. It prohibits foreign commercial enterprises and non-resident individuals from buying homes anywhere in Canada.
The federal government says foreign ownership has fuelled worries about Canadians being priced out of housing markets in cities and towns across the country.
But for developers, the measure has made it harder to access the capital needed to get projects off the ground.
“While the intention is understandable, the current broad-brush form of the ban also limits access to foreign capital that could help builders meet presale thresholds and finance new construction,” the Homebuilders Association Vancouver said in a statement.
The association has called for a more flexible approach to the policy. The group suggests Canada could look to Australia’s model, which allows foreign buyers to invest in new builds under specific conditions, such as requiring the units to be rented out or limiting resale timelines.
Another drag on demand is a recent slowdown in population growth.
A recent advertisement from a Surrey real estate agent which touted a 25 per cent discount on a housing unit highlights how buyers have an advantage in the current Metro Vancouver housing market. Mark Ting, a partner with Foundation Wealth and On The Coast’s personal finance columnist, says that the trend of housing prices going down may be sustained.
As of spring 2025, B.C.’s population stood at approximately 5.7 million. But the province recorded a net population decline, with 2,357 fewer residents compared to the previous quarter.
The drop comes amid changes in federal immigration policy.
Under its 2025–2027 Immigration Levels Plan, the federal government has introduced targets not only for permanent residents but also for temporary residents, which include international students and foreign workers. The plan aims to reduce temporary resident volumes to no more than five per cent of Canada’s total population by the end of 2026.
The Canadian Mortgage and Housing Corporation says the condo slowdown is likely to persist this year as supply increases outpace demand.
www.cbc.ca (Article Sourced Website)
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