First Quarter, March 2018 - HOUSING FORECAST UPDATE
Multiple Listing Service® (MLS®) residential sales in the province are forecast to decline 8.6 per cent to 94,855 units this year, after recording 103,763 residential sales in 2017. MLS® residential sales are forecast to edge back a further 1 per cent to 94,025 units in 2019. Housing demand is expected to remain above the 10-year average of 84,800 units into 2020.Strong economic performance and favourable demographics in BC are underpinning housing demand. However, more stringent mortgage qualification rules, rising interest rates and already elevated home prices are expected to provide headwinds to consumer demand.
The BC economy has experienced four consecutive years of 3 per cent or more real GDP growth, with 2017 growth estimated at 3.8 per cent. The dollar volume of BC exports increased 13 per cent to $43.8 billion last year, despite a tariff-induced pull-back in softwood lumber exports. Employment climbed 3.7 per cent, nearly twice the national average of 1.9 per cent. More than 87,000 jobs were added to the economy last year, while the unemployment rate fell to its lowest level since 2008. Retail sales climbed nearly 10 per cent over the same period.
Strong economic performance has coincided with favourable demographics, especially the millennial generation entering their household forming life-stage. This has contributed to BC home sales cresting 100,000 units in each of the last three years and low vacancy rates in the province’s major urban centres. However, low unemployment and tepid labour force growth is expected to slow economic expansion over the next two years. Housing headwinds of tighter mortgage qualification rules, a rising interest rate environment, an already elevated price level, and BC government policy efforts to tamp down demand will also contribute to slower consumer demand through 2019.
The supply of homes for sale continues to trend near decade lows, which has contributed to escalating home prices in most BC regions. However, residential construction activity is at a record level. Over 60,000 units are under construction in the province compared to less than 45,000 during the previous peak in 2008. In Metro Vancouver, over 42,000 units are in the pipeline, 56 per cent above 2008 levels. As a result, new home completions are expected to rise significantly over the next several quarters, adding much needed supply to the market. The net effect of slower housing demand and a marked expansion of the housing stock will be more balanced market conditions and less upward pressure on home prices.