B.C. housing market in recovery; growing population, lower borrowing costs and pent-up demand to drive higher prices and sales
Vancouver, B.C., November 25, 2019 – B.C.’s housing market is recovering much quicker than anticipated after the 2018 downturn, according to Central 1 deputy chief economist Bryan Yu in the latest B.C. Resale Market Housing Outlook 2019-2021.
The report finds that steep mortgage rate declines combined with continued population growth are boosting demand in the housing market. These factors coupled with steady economic growth and price declines in large urban areas have prompted buyers to return to the market – particularly in the Lower Mainland.
“Home sales have returned to more normal levels following over a year of policy induced declines but B.C.’s sales recovery has lagged the rest of Canada,” said Yu.
The Lower Mainland, which was hit hardest by the 2018 downturn, has seen sales turn higher. Significant price declines over the past year and lower borrowing costs have buyers returning to the market among all housing types, particularly in the lower priced condominium sector. This upward sales momentum will continue into 2020, according to Yu.
He forecasts a province-wide decline in provincial resale transaction by 7 per cent this year, with a 13 per cent increase in 2020, followed by a further 4 per cent increase in 2021 to 85,475 units.
“This reflects growth in the economy, population, federal programs to support first home purchases and persistence of low borrowing costs. However, we do not anticipate sales to recover to 2017 levels, when resale transactions were just shy of 100,000 units,” Yu said.
The B.C. median home value for 2019 is $522,000 – a 2.4 per cent decline on last year. According to Yu, British Columbians can expect to see that value rise by 3.8 per cent in 2020 and by 4 per cent in 2021, to $568,000, driven by a stronger sales environment and the retreating supply of units for sale in the province.
“Metro Vancouver will lead this increase which will undoubtedly bring affordability challenges back into the spotlight,” said Yu.
Housing starts were surprisingly unscathed by the downturn, but the pace of growth will slow by 16 per cent in 2020, according to Yu.
Whilst “a flurry of new construction” – driven by a surge in condominium construction in Vancouver – has lifted housing starts to about 44,000 units in 2019, many of these on-going projects were pre-sold in prior years when market conditions were stronger.
Pre-sales have been sluggish in 2019, therefore project construction will be delayed in 2020 onwards and condo starts are likely to be curtailed in 2020. Yu observes that the combination of sluggish presales, the higher level of units under construction and higher new home inventory are making builders cautious.
Despite these constraints, he expects that population growth – driven by international immigrants seeking work or a post-secondary education in B.C. – will drive ownership and rental demand, leading to a 7 per cent increase in housing starts in 2021, to 39,500 units.
“Home ownership remains out of reach for many households,” said Yu, adding: “Decades of insufficient construction of purpose-built rental building, rising price trends over the past 10 years and a growing population and economy continue to underpin a tight rental market despite rising rental construction trends in recent years. Mortgage stress tests have further added to rental market pressure with some would-be purchasers having to delay their purchase decisions due to more stringent qualification rates.”
Rental vacancy is at 1.4 per cent in the largest urban areas: Metro Vancouver, Victoria, Abbotsford-Mission and rent growth is expected to increase by between 4 and 4.5 per cent annually. However, these gains will be felt stronger in turnover rents as existing tenants will be protected by rent control measures and a tight labour market. Wage appreciation will blunt much of this impact on household budgets.
- Turnaround in B.C.’s housing market to lift sales and prices
- Low mortgage rates, modest economic growth, and pent up demand to underpin sales performance
- Higher median home values forecast for 2020 ($542,000) and 2021 ($568,000)
- Gravity defying housing starts in 2019 to pullback
- Low vacancy rate and rent hikes to continue in rental market
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Meadhbh Monahan (pronounced ‘Maeve’) Communications Specialist
T 604 737 5068