CPABC: BC’S TIPPING POINT

BRITISH COLUMBIA – CPABC recently launched its BC Check-Up: Live report, the second in its triannual series on investing, living, and working in British Columbia. This latest iteration focuses on BC’s strong population growth and ongoing housing supply and affordability challenges.

Immigration soared, fuelling record population growth

As of July 1, 2023, BC’s total population count was 5.52 million, marking a 3.0% increase from July 1, 2022. The net increase of 162,729 people was the largest in the province’s history, surpassing the previous record of 129,619 new residents just one year earlier. To put the recent population surge into perspective, BC saw an increase of 498,034 residents, or 9.9%, between 2018 and 2023, compared to an increase of 386,036 residents, or 8.3%, between 2013 and 2018.

Population growth in the province has fluctuated dramatically since the onset of the COVID-19 pandemic—largely due to the implementation and subsequent easing of restrictions on international migration—but we’ve seen significant growth over the past two years as higher immigration targets have led to a surge in international arrivals. In fact, for the year ended July 1, 2023, BC welcomed 175,024 international migrants¹ (see Figure 1), which accounted for the entire population increase. (Negative natural growth —more deaths than births—and interprovincial migration reduced population growth). This trend of higher levels of international migration is expected to continue in 2024, since BC is a primary destination for many newcomers to Canada.

As outlined in its latest immigration plan, the federal government aims to admit 1,485,000 permanent residents to Canada between 2024 and 2026.² This means the annual target for each of these three years is higher than the record number of 471,550 new permanent residents set in 2023.

Figure 1: Population Growth in BC by Type, 2018-2023

Source: Statistics Canada, Table 17-10-0150-01.

BC lost residents to other provinces for the first time in a decade

While international immigration pushed the province’s population growth rate to a nearly three-decade high, BC also saw a surge in the number of residents relocating to other provinces. The result was a net outflow of 8,228 residents to other provinces, marking the first time since 2013 that interprovincial migration was negative. By comparison, BC welcomed 26,069 residents from other provinces in 2022 and gained an average of 18,620 people per year from 2015 to 2019.

There was a particularly notable increase in the number of British Columbians relocating to Alberta, with BC losing 16,462 people to its neighbour in 2023, compared to a net gain of 8,301 residents in 2022. The jump in the number of people leaving BC is likely attributable to worsening cost-of-living conditions, especially when it comes to the housing market.³

Another important consideration is the age profile of population inflows and outflows. As mentioned in the July/August 2023 issue of this magazine, immigration is key to reducing the economic impacts of an aging population.⁴ Nearly two-thirds (61.2%) of international migrants who moved to BC in 2023 were between 25 and 54 years of age, which is considered the core working-age range (see Figure 2); by contrast, only 15.8% of the net interprovincial outflow were members of this age group. While this is good news from the standpoint of BC’s overall age profile, negative interprovincial migration of any size is discouraging.

Figure 2: Net Population Flows by Age and Type, 2023

Source: Statistics Canada, Table 17-10-0151-01. Age zero includes people born after July 1, 2022.

Along with negative net interprovincial migration, natural growth (births minus deaths) also detracted from BC’s population total in 2023, reducing the province’s residents by 4,067 people. This was the second consecutive year of negative natural growth for the province.

Housing completions and population growth diverged

As BC’s population growth accelerated in 2023—particularly in large urban centres—so did the gap between new housing demand and new housing supply. In BC’s seven census metropolitan areas (CMAs), where population growth accounted for nearly 92% of the provincial total, new housing construction couldn’t keep up with new demand. While the 30,621 units completed last year represent a 1% increase from the number completed in 2022, the number of residents in CMAs grew by 3.6% over the same period (see Figure 3). Combined, these percentages translated to only 0.21 new completed housing units per new resident in 2023, well below the 2019 figure of 0.45.

Moreover, the types of housing constructed in recent years have trended towards smaller units like apartments and townhouses, which accommodate fewer people. In each of the last four years (2020 to 2023), attached units accounted for more than three-quarters of completed homes (77.9% in 2023)—an increase from 73.2% in 2018.

Figure 3: Population Growth versus Housing Units Completed in BC CMAs, 2018-2023

Sources: Statistics Canada, Table 17-10-0148-01 and Canada Mortgage and Housing Corporation, Housing Market Data. Note: Data refers only to housing units completed and population growth in census metropolitan areas.

Home prices remained resilient despite slow resale market

Over the past two years, the home resale market has faced significant headwinds due to elevated borrowing costs. However, sluggish sales have not translated to a meaningful improvement in affordability.

Housing prices in BC peaked in March 2022 and subsequently moderated after the Bank of Canada began raising interest rates that same month (see Figure 4). However, the reversal in prices was short-lived, as prices started rising over the past year. The benchmark price of a home in BC was $967,700 in April 2024, up 2.4% from April 2023 (see Table 1). While this represents an 8.4% pullback from the March 2022 peak, the benchmark price is still 42.5% higher than it was in April 2019.

Figure 4: BC Home Benchmark Price, January 2019 to April 2024

Source: Canadian Real Estate Association, Composite Benchmark Home Price Index. Seasonally adjusted.

Recently, the Bank of Canada cut its key policy interest rate for the first time since the start of the pandemic signalling the start of an “easing cycle”. Lower interest rates will help push housing prices higher as the cost of borrowing becomes more palatable. Based on the latest quarterly forecast from the BCREA,⁵ prices are expected to rise by 1.6% in 2024, and by a further 3.7% in 2025.

Table 1: BC Home Benchmark Price by Region, April 2024

Price	British Columbia	Vancouver Island	Victoria	Lower Mainland	Fraser Valley	Interior BC
Benchmark price, April 2024	$967,700	$679,200	$855,300	$1,113,100	$991,300	$644,500
% change since April 2023	2.4%	4.4%	-0.2%	2.6%	2.0%	-2.7%
% change since April 2019	42.5%	57.8%	39.5%	37.3%	47.0%	43.7%

Source: Canadian Real Estate Association, Composite Benchmark Home Price Index. Seasonally adjusted.

The increase in home prices over the last five years has been widespread. While benchmark prices remain highest in the Lower Mainland, where affordability has long been a concern, BC regions that have historically had relatively affordable housing options have experienced the largest price increases. For example, the benchmark price of a home on Vancouver Island was $679,200 in April 2024, marking a 57.8% increase from the $430,400 recorded in April 2019 (see Table 1). Substantial increases have occurred in most other large population centres, putting home ownership out of reach for many residents.

Rental rates continued to soar

Despite the provincial government’s efforts to limit rent increases for existing tenants to 2.0%, renters were hit hard in 2023 due not only to rent increases but also to low availability. In fact, the average rental price increased by 8.5% between 2022 and 2023, and the vacancy rate edged lower (-0.1 ppt) to 1.2%, marking a record low.

The average monthly rent for one-bedroom units rose to $1,558 in 2023, an 8.8% increase from the previous year. Average rent for larger units with three or more bedrooms saw a more modest increase of 3.8%, reaching $2,146 (see Figure 5). Since 2018, the average rent for larger units has surged by $625, while smaller units have become $368 more expensive.

Figure 5: BC Rental and Vacancy Rates, 2018-2023

Source: Canada Mortgage and Housing Corporation, Rental Market Survey Data Tables.

Lower incomes and largest household debt put strain on households

The issue of affordability is further compounded by the fact that housing and rental prices have outpaced income growth. In fact, the latest available data from 2022 shows that the median after-tax income for families in BC was $102,300—down by 2.1% from 2021. Single individuals who were not part of an economic family⁶ experienced an even larger decrease of 8.6%, declining to a median after-tax income of $38,300 in 2022.

Between 2018 and 2022, the median after-tax income for families was essentially flat, rising by only 0.4%. This increase paled in comparison to that of the benchmark home price (+33.5%) and the average rental price (+22.0%) over the same period.⁷

With household incomes lagging behind the high cost of living, British Columbians are accumulating more debt than people in other parts of Canada. In fact, as of Q4 2023, household debt in BC accounted for 203.7% of household disposable income—the highest ratio among the provinces—putting many residents in a precarious financial position, especially during periods of economic turmoil.

Notably, households where the major income earner is younger than 35 years old have reduced their mortgage debt burden significantly since Q4 2018; however, this is largely due to the fact that many younger British Columbians have been locked out of the housing market due to high borrowing costs and real estate prices.⁸

The bottom line

Affordable housing is getting further out of reach for many British Columbians, and there are already signs that both current and prospective residents are looking elsewhere when considering a place to live. Addressing the housing crisis in this province will require innovative policies and collaboration from all levels of government. It will also be crucial to BC’s economic success, as the province wants to attract more workers in the coming years.

While immigration is absolutely necessary to help address current and future labour shortages, it alone will not help improve the standard of living in BC. Policies that aim to improve productivity,⁹ boost incomes, and increase the housing supply need to be prioritized to ensure that this province remains an attractive destination to call home.

CPAs Expect Housing Affordability Challenges to Persist

BC’s housing affordability crisis continues to loom large for our members, as revealed by the latest CPABC BC Check-Up survey.* The majority of CPAs surveyed expressed a pessimistic outlook, with 61% expecting housing affordability to further deteriorate in their region over the coming year. By contrast, only 8% said they expect housing affordability to improve, while the remaining 31% said they expect affordability levels to stay the same. These sentiments came as interest rate cuts appeared imminent (at the time of the survey) and more prospective buyers were expected to enter the market as borrowing costs declined.

Survey respondents said high housing costs are the biggest hurdle for businesses as well, with 86% of respondents identifying this issue as a significant challenge to business success. Notably, housing prices have ranked among the top business concerns for CPAs since 2019, underscoring the enduring significance of this challenge in the province’s economic landscape.

Overwhelmingly, respondents to our latest survey said all levels of government should be taking more decisive action to tackle affordability issues, signalling a growing dissatisfaction with current measures. These results underscore the need for a significant boost in housing supply, especially as the province looks to attract more workers to support its aging population.

Rating on Government Performance on Improving Affordability in BC

Source: CPABC BC Check-Up survey, n = 611 Conducted from March 27 to April 16, 2024.

* CPABC commissioned Leger to conduct a web-based survey of CPA members across BC to solicit their thoughts on the province’s current and future economic situation and on their current workplace environment. A total of 611 surveys were completed between March 27 and April 16, 2024, which represents an overall response rate of 10%.

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Jack Blackwell is CPABC’s economist. This article was originally published in the July/August 2024 issue of CPABC in Focus.

Footnotes