The report covers regional and provincial residential investment and the rental market
BRITISH COLUMBIA, December 18, 2018 – Potential home buyers and sellers lose out in B.C.’s housing market in 2018 as federal and provincial rules contribute to a mild provincial housing recession, according to the latest Central 1 Credit Union (Central 1) forecast.
Central 1’s Deputy Chief Economist, Bryan Yu, said that a policy-induced mild housing recession that swept the province in 2018 was evidenced by a sharp decline in sales, eroding prices and a slowdown in new home construction.
“The federal government’s ‘stress tests’ cut potential buyers’ purchasing power, which in turn, has severely affected home sales. Further dampening demand have been higher mortgage rates and various provincial policy measures.”
“B.C. annual resale home transactions decline 17 per cent this year and median resale prices dip two per cent to $520,000. Gone are the days of rapid price escalation,” said Yu.
Plummeting home sales found bottom mid-year and continue to trend at an annualized pace of about 77,000 units compared to more than 100,000 units in late 2017 . More recent sales trends have held range-bound, while price levels are in decline in larger markets.
Yu said that metro B.C. has been hit the hardest. “Sales in B.C.’s combined metro markets of Vancouver, Abbottsford-Mission, Kelowna and Victoria are down 40 per cent compared to the end of 2017, led by the Lower Mainland markets.” This reflects higher price levels in these areas and downpayment constraints.
With no signs that the rules will be reversed, the report predicts rising but subdued sales over the forecast period and flat median home values Low sales reflect a disconnect between seller expectation and buyer ability to pay.
Builders have taken stock of the rapid shift in this year’s market conditions. Urban starts have dropped sharply, trending at about 31,000 annualized units since September compared to 40,000 units for the first eight of 2018.
“We predict B.C.’s housing starts will fall to about 32,000 units in both 2019 and 2020 following nearly 40,000 units this year and 43,500 units in 2017,” Yu said.
The downturn in housing starts will shallower than previous cycles. Steeper declines are typically associated with a broader economic recession rather than a policy-driven downturn. The report finds solace in B.C.’s tight labour market—observed in the lowest unemployment rate in Canada and high job vacancy rates—wage gains and population growth that underpins consumer demand.
In contrast, positive housing market outlooks are predicted on Vancouver Island and in Northern B.C. Demand will remain strong in retiree-driven markets on the Island and prices will grow due to the LNG project and associated pipelines in Northern B.C.
Rental market conditions are forecast to remain tight, placing strain on renters searching for accommodations. The average apartment vacancy rate holds firm at a low 1.3 per cent through the forecast period as rental supply additions are easily absorbed by the market demand. Apartment rent growth averages nearly five per cent annually, constrained by lower allowable rent increases by the government.
Highlights from the report:
- B.C. resale home transactions forecast to decline 17 per cent in 2018 to 81,465 units before edging up 0.6 per cent in 2019 in 81,990 units and four per cent in 2020 to 85,110 units. Large urban markets experience sharpest sales declines.
- Mild buyers’ market conditions curtail home values in larger urban areas, extending into 2019
- Northern B.C. housing markets to outperform southern B.C. market due to LNG investment
- Housing starts slowdown to continue through 2020 reflecting weaker housing demand. Negative growth in real residential investment will drag on the broader B.C. economy
Read the full B.C. Housing Outlook 2018 – 2021.
About Central 1
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Member & External Communications Manager
Central 1 Credit Union
T 604.737.6814 or 1.800.661.6813 ext. 6814
Deputy Chief Economist
Central 1 Credit Union
T 604.742.5346 or 1.800.661.6813 ext. 5346