House Prices in BC to Keep Rising Over 2015 and 2016

Sales across the province will be up 20 per cent by end of this year but fall next year, slowing price growth rate, says bank 

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Home prices in British Columbia will keep rising this year and next, but the rate of price growth will start to slow in 2016, according to an RBC forecast released August 19.

The report said that average BC resale home prices in 2015 would be 7.8 per cent higher than 2014's average, and in 2016 would be 4.9 per cent higher still. This prediction aligns with a forecast made by TD Bank July 30, which said Vancouver home prices were likely to see a "soft landing".

The bank predicted sales of homes on the MLS across the province will be up 20 per cent by end of 2015 but will fall 4.8 per cent in 2016, contributing to the slower price growth rate.

“Our forecast shows a very strong gain in British Columbia (up 20.5 per cent)… thanks to low interest rates and improved labour markets,” said the report.

Housing starts in BC are forecast to follow a similar pattern, rising 16.7 per cent in 2015 but dropping 6.3 per cent year over year in 2016 as demand eases.

Prices across Canada are also forecast to increase over this year and next year, rising 4.6 per cent in 2015 and 3.2 per cent in 2016. RBC said the slowing in price growth could be driven by an increase in interest rates in that time.

The report said, “Our base case scenario is that the Bank of Canada will begin to remove monetary stimulus by the middle of 2016 and raise the overnight rate by 75 basis points to 1.25% during the second half of next year.”

RBC added, “The affordability stresses found at the national level almost entirely reflect the situation in two major markets: Vancouver and Toronto.

“Valuation concerns in Canada in effect are primarily about the elevated prices of single-detached homes in Vancouver and Toronto.”

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