BRITISH COLUMBIA – BC home sales remain exceptionally strong as 2020 draws to a close and continued sales growth is expected into 2021, driven by low interest rates, according to Central 1 Deputy Chief Economist, Bryan Yu in his latest BC Housing Outlook: 2020-2022.
Bryan Yu is Deputy Chief Economist Central 1
“The rebound in housing demand from pandemic-induced lows in the spring has been spectacular,” said Yu. Despite the pandemic, housing demand in BC has accelerated, stoked by sharp cuts to mortgage rates.
The impact of pandemic job losses on demand was limited as those worst affected by job losses are low income workers not in a position to purchase a property, while middle and higher income employees were sheltered by remote work opportunities and quicker recovery in incomes.
Increased savings, and a shift in preference towards suburban markets instead of downtown condos has further driven housing demand in the province, Yu finds. Average home prices were up 13 per cent year-over-year in October, with strongest gains recorded in the interior and island markets due to increased demand for recreational properties as employees continue to work remotely, the report finds.
Meanwhile, the median annual price of a home in BC is forecast to rise by 9.3 per cent (to $585,000) this year, with a further 5.6 per cent increase (to $615,000) expected in 2021, followed by a four per cent increase (to $640,000) in 2022.
Annual resale transactions are forecast to see a 20 per cent increase this year, reaching 85,080 units, followed by a further rise of 12 per cent in 2021 to 95,200 units. A drop of 8.5 per cent (to 87,125 units) is expected in 2022 as momentum declines due to a bottoming of the rate cycle and satiation of pent-up demand. Yu does not foresee a correction in home values over the forecast period.
“Households will continue to enjoy low mortgage rates despite a lift in bond yields in anticipation of a vaccine and strengthening economic growth,” he said, adding: “Elevated liquidity at financial institutions will likely mean aggressive mortgage pricing through the spring to compete for market share, driving rates even lower and maintaining rock bottom rates until mid-2021.”
Housing demand is outpacing the increase in new listings and contributing to a tight supply of inventory across all regions, the report states. However, Yu explains: “Inventory is forecast to pick up in the spring of 2021 as more owners look to higher prices and an end to the pandemic to test the market, while demand is expected to ease.”
The appetite for downtown condos will return once the pandemic abates, and inflows of new immigrants and international students increase, according to Yu, who adds that these trends will also tighten the rental market and drive up rent growth by about one per cent in 2021. Housing starts declined by 21 per cent this year despite robust resale market activity.
“New housing construction lags resale market demand, and in recent years was slowed by various policy measures 2 that hampered pre-sale activity including introduction of mortgage stress tests and the foreign buyer tax,” said Yu. Total housing starts are forecast to rise 6.5 per cent in 2021 to 37,700 units, increasing by a further 4.5 per cent in 2022 to 39,400 units.
“A shift to mid-40,000 annual starts is expected in 2023-25 when more condo apartments break ground,” said Yu.
Highlights
- BC median annual home price forecast to rise by 9.3 per cent in 2020, by 5.6 per cent in 2021 and by four per cent in 2022
- Annual resale transactions up 20 per cent in 2020, up 12 per cent in 2021 and down 8.5 per cent in 2022
- Elevated liquidity at financial institutions will mean aggressive mortgage pricing through spring 2021 Read the BC Housing Outlook 2020-202
