In the throes of a housing correction, British Columbia’s Lower Mainland might be witnessing the beginnings of recovery.
According to an economic outlook report from Central 1 Credit Union, the signs of recovery are there, however, its deputy chief economist still calls for tapered expectations.
“We’ve started to see a bottoming in the Lower Mainland area; sales hit a bottom in the spring and summer months, but now we’re seeing a moderate bounce back,” said Bryan Yu. “The latest numbers from CREA [Canadian Real Estate Association] suggest there was a nice increase in July, but levels are still around 2014 levels. To keep it in context, sales are on the upswing and the labour market is helping with that.”
Although there’s too little data to definitively state that the Metro Vancouver market correction is receding, Yu believes buyers have nevertheless adjusted to B-20’s rigidity.
“The change in mortgage rates and what people are receiving in the market now are a big lift for affordability, provided they meet B-20’s restraints,” he said. “A 2.8% on a five-year fixed mortgage is a 50 basis point drop from late 2018, so the numbers favour buyers. When we combine those factors we’re seeing relative affordability.”
The report also mentioned “recession-like conditions” in the region’s resale market going back to B-20’s implementation in January 2018. Yu added that sales are trending at 2012 levels and prices have dipped 10% below their peak.
However, construction starts will stay high through the end of the year because of the buying frenzy of the last three or so years.
“Year-to-date growth is over 15% for B.C., a surprisingly strong housing start performance for the first half of the year for the province,” said Yu. “We have to be careful, though, because there’s a lot of volatility when it comes to multifamily starts with big swings that come quickly. Our view is that given the resale and presale slowdowns, we see a drop off in momentum in the back half of 2020.”
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