ROBUST DEMAND TO PUSH HOME SALES HIGHER THIS YEAR
Housing demand across the province this year is expected to produce the highest level of unit sales since 2007.
The alignment of economic growth, consumer confidence and rock-bottom mortgage interest rates is pushing home sales significantly higher. Multiple Listing Service® (MLS®) residential sales in British Columbia are forecast to rise 12 per cent to 94,300 units this year, after climbing 15 per cent to 84,000 in 2014, while MLS® residential sales are forecast to edge back nearly 3 per cent to 91,600 units in 2016. This will be the first year since 2007 that BC home sales will surpass the ten year average. A record 106,300 homes traded hands on the MLS® in BC during 2005.
Despite the aftershock of falling oil prices, the province is emerging largely unscathed and is shaping up to lead national growth this year. After increasing 2.4 per cent in 2014, the BC economy is forecast to expand 2.7 per cent both this year and next. Due to a more robust US economy and a competitive exchange rate, BC exports have been pushed higher. In addition, increased tourism - from international travelers to domestic “stay-cationers” - is expected to provide a much needed boost to many BC communities.
After a number of years of tepid consumer spending, retail sales are expected to
post a second consecutive year of robust growth, climbing 5.9 per cent this year after a 5.8 per cent up-tick in 2014. While there are mixed signals between measures of employment growth, labour demand is on a decidedly upward trend, with the average weekly wage forecast to climb more than 3 per cent this year and the unemployment rate expected to fall to a 5-year low.
Across the province, nine of BC’s 11 real estate board areas are forecast to experience increased housing demand this year. Vancouver and the Fraser Valley are forecast to lead the province with a 16 to17percentincreasein residential sales, while BC Northern, the board with the largest geographic area, is expected to experience some entrenchment this year before returning on a growth path in 2016.
Stronger consumer demand in most regions combined with fewer homes available for sale has most areas of the province now exhibiting balanced conditions, with the single- detached market in many of the South Coast communities favouring home sellers. The average MLS® residential price in the province is forecast to increase 7.4 per cent to $610,500 this year, and a further 1.7 per cent to $621,000 in 2016.
Provincial new home construction edged back a little over 1 per cent to 26,741 units last year, with fewer single-detached
and multiple starts. Stronger consumer demand and dwindling inventories of newly completed and unoccupied units is expected to lead to a 7 per cent increase in BC housing starts to 28,700 units this year, and a further 1.4 per cent to 29,100 units in 2016.
REAL ESTATE BOARD OF GREATER VANCOUVER
The Vancouver housing market is expected to build on last year’s strong performance and post the highest number of residential transactions in a decade. The recent surge in consumer demand comes on the heels of several years of below-average performance. While rock-bottom mortgage interest rates have provided a counterbalance to rising home prices, stronger economic conditions have boosted consumer confidence and elevated consumption from the retail level all the way up to home purchases. Housing demand in the largest urban market in the province is being driven primarily by local demand from both new and existing residents. While foreign investment is evident in the luxury segment, it remains a relatively small niche market in Metro Vancouver. MLS® residential sales through the Real Estate Board of Greater Vancouver are forecast to rise nearly 17 per cent to 39,400 units this year, before edging back 4.6 per cent to 37,600 units in 2016.
Market conditions in Vancouver have improved as a result of consumer demand rising faster than the number of homes for sale. While the market is exhibiting sellers’ market conditions overall, there is variability according to product type and its location in
the region. The MLS® Home Price Index (HPI) Composite, the price of a typical home in the REBGV area, was up 8.5 per cent in April compared to the previous year. However, elevated prices in the detached home market were the main driver as the proportion of detached homes in the housing stock continues to decline. Over the past five years, the HPI for detached homes climbed 29 per cent while the HPI for apartments increased by a more modest 5 per cent. The average MLS® residential price is forecast to increase 7 per cent to $870,000 this year and a further 3 per cent to $898,000 in 2016, mainly on the strength of rising detached home prices.
Robust consumer demand has helped pull both resale and new home inventories lower and tighter market conditions have given a green light to Vancouver builders and developers. However, a relatively high number of new units currently under construction is expected to temper housing starts to a little over 19,000 units in 2015. Next year, total housing starts in the Vancouver CMA are forecast to increase 2.4 per cent to 19,500 units.