July 5, 2014
BC housing sales and prices are predicted to continue their rise over the next few years, but will be only a modest source of growth for the BC economy as a whole, according to a Central 1 Credit Union report released July 3.
The report was issued on the same day that the Real Estate Board of Greater Vancouver and the Fraser Valley Real Estate Board reported increases in home sales and prices in Greater Vancouver and the Fraser Valley respectively.
B.C. Housing Forecast 2014–2017 forecasts that median home prices in the province will continue to climb, with growth expected to average just under 3 per cent per year through 2017 to $429,000.
“Price growth is expected to average less than 3 per cent a year through to 2017 as higher borrowing costs and stricter mortgage insurance policies weigh on affordability,” said Bryan Yu, Central 1 economist and report author.
“The strongest gains in BC will be in the Lower Mainland and Northern B.C. regions. Excess supply and subdued demand hold back price growth in the interior and island markets.”
Annual housing starts are forecast to remain at about 27,200 units in 2014 and are on track to average 30,000 units by 2016. Because of the surplus of housing inventory, housing starts will trail household formations, which are forecast to average about 31,000 from 2014 to 2017.
Northern BC’s housing market outpaces the rest of the province, with stronger port activity and pre-construction projects related to LNG development.
BC’s economy will expand by less than 2.5 per cent this year, but is forecast to make some steady gains, averaging more than 3.5 per cent from 2015 to 2017.
The forecast for the housing market, however, remains mixed. Low borrowing costs have boosted BC’s market this year, particularly in the detached housing sector in the Lower Mainland market, but rising mortgage rates and tightened lending policies are predicted to reduce sales over the forecast period.
“Despite a rising rate mortgage environment, the stronger economic outlook is expected to drive consumer confidence, income and employment,” said Yu.
The loss of BC residents to Alberta and Saskatchewan is expected to reverse in 2015, with an inflow of landed immigrants and Canadians from throughout the country driving demand for new homes. In the meantime, housing starts are predicted to remain steady, despite a busy early part of 2014, in which urban markets posted a 14 per cent year-to-date gain through May.