In its first quarter forecast, the British Columbia Real Estate Association projects moderate growth for the provincial housing market in 2020. Led by returns to average levels of activity for Greater Vancouver and the Fraser Valley, sales in BC are expected to increase a robust 10.3 percent this year, coinciding with a 4.8 percent improvement in the average MLS sales price.
While sales in Greater Vancouver and the Fraser Valley are expected to rise by 18.8 and 12.4 percent, respectively, only one other real estate board, Victoria, is predicted to see an improvement of more than 5 percent. Price growth in most areas of the province is forecast to be modest, with only three – Vancouver Island, the Fraser Valley and BC Northern – showing the potential for an increase of more than three percent.
The numbers don’t jump off the page, but their upward trajectory points to the enduring appeal of B.C. real estate and the strong fundamentals supporting the provincial economy, a fact many in the province are quick to point out. A commonly held belief in British Columbia is that it wasn’t a lack of economic activity or population growth that slowed the BC housing market; it was a bevy of new taxes and lending restrictions that shocked the market into paralysis.
The effects of those changes are now fading, only slightly behind schedule.
“We did quite a bit of research on what happens when the CMHC or the Department of Finance changes mortgage rules or makes mortgage regulations more strict,” says BCREA chief economist Brendon Ogmundson. “In the past, it’s had a pretty immediate impact: the peak of the impact is three to six months and by 12 to 15 months it’s faded away. We got that to a certain extent with B-20 [aka the mortgage “stress test”], except it was much deeper than any of those other policies and it took a lot longer to turn the corner.”
Now that consumers have had a chance to adjust to the new landscape, Sam Hanson, CEO of South Street Property Group, says they are more than ready to get back into the market.
“We’re very optimistic about the next two to three years in the residential markets in B.C.,” Hanson says. “People are moving here. People are creating jobs here. People are setting up high tech businesses here. Prices are more attractive than they were a year ago and people are now able to step up and justify their purchases.”
Most economic indicators are pointing in the right direction. BCREA projects GDP growth of 2.4 percent in 2020, along with strong growth in wages, employment and retail sales. But housing supply will continue to be an issue. Housing starts were at a record high in 2019, but they are expected to shed 16.1 percent in 2020 and a further 8.5 percent in 2021.
“I think the province will always play catch-up,” in terms of housing supply Hanson says. The natural bounty that makes B.C. such a desirable place to live – the ocean, the lakes, the mountains, fertile agricultural land, etc. – also limits the amount of available real estate. “We see development, of course, but it’s basically infill development within the confines of an area.”
“We’re going to be somewhat undersupplied as long as demand continues to recover,” says Ogmundson, “especially over the next five to 10 years, with a lot of the millennial cohort aging into their prime household forming years. There’s not going to be a lot of supply to match demand, so I think we could have some tightening of markets.”
Shrinking supply, growing demand and a healthy economy fuelled the last housing boom in B.C. No one appears to have the appetite for another one, but if that’s all that’s being served up in 2020, investors may have no choice but to dig in.
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