Volume 34 • Issue 2 • July 2014 | ISSN: 0834-3980
Highlights:
• Improvements in broader economic growth, employment, and recreational demand to lift housing market despite rising interest rates • Existing home sales to rise more than ten per
cent this year following weak 2013
• Median provincial price to reach $396,000 this year on Lower Mainland gains, and forecast to reach $429,000 by 2017 • Lower Mainland and northern B.C. housing
markets relatively stronger performers over forecast period
• Housing starts to trend modestly to near 30,000 units by 2016 higher but remain below household formation
British Columbia’s housing market is expected to post stronger sales and rising prices over the next few years but remain only a modest source of growth for the provincial economy. Growth in the broader economy and labour market, a turnaround in recre-ational housing demand and population gains under-pin housing stronger housing demand, but gains are partially offset by higher borrowing costs and the tighter mortgage insurance policies implemented in recent years.
Resale housing transactions are forecast to shift higher after a disappointing few years of activity but remain subdued relative to the size of the population base. Growth in the median price is forecast to aver-age slightly less than three per cent per year through
year through 2017 to $429,000. However, regional performance will vary with the strongest gains in the Lower Mainland and northern B.C. markets.
Interior markets and island markets, which are still recovering from the recessionary decline in housing demand and excess supply, record relatively weaker pricing conditions. Builders are slowly expected to ramp up new home construction, but remain cautious due to tempered command conditions and elevated new home inventories in a number of markets.
Housing market performance depends on various contributing factors, including economic conditions, population growth and demographics, income growth and fi nancing conditions. Each of these driv-ers will exert positive and negative forces on sales in the next three years.
In past cycles, the housing sector has led economic growth, but the prolonged period of ultra-low inter-est rates since the recession points to a housing market performance that lags broader economic and employment growth. Following modest expansion in line with the national economy of about two per cent
B.C. Housing Forecast 2014 - 2017
1990 1994 1998 2002 2006 2010 2014 0 20 40 60 80 100 120 Units (000s) 0 100 200 300 400 500 Dollars (000s)Transactions (L) Median Price (R) Source: Landcor Data Corp. and Central 1 Credit Union
Resale Market Forecast, B.C.
FORECAST
Housing Forecast - Table 1
2012 2013 2014 2015 2016 2017
Residential Resale Transactions, Units 63,798 66,250 75,075 79,150 84,075 88,195
% change -11.1 4.4 13.3 5.4 6.2 4.9
Residential Resale Median Transaction Price 382,000 384,000 396,000 406,000 418,000 429,000
% change -4.5 0.8 3.1 2.5 3.0 2.6
Housing Starts 27,465 27,054 27,200 28,300 29,300 31,000
% change 4.0 -1.5 0.5 4.0 3.5 5.8
in 2013, B.C.’s economy is forecast to expand by less than 2.5 per cent this year. The provincial economy is still in a relatively low-growth state but is expected to improve signifi cantly over the next few years gearing off an export-led economy and a ramp up of major project construction.
Growth will lift housing momentum, but short-to-medium demand will be tempered by the weaker growth and stagnant job market of recent years. Provincial economic growth is forecast to average more than 3.5 per cent from 2015 to17. Hiring growth shifts to near two per cent by 2016, which underpins housing demand and population gains. Regional performances will differ given varied eco-nomic structures.
Growth in the population is a key driver for net new housing demand, but gains are expected to lag the economy at about one per cent through 2015 before rising in the latter years. Net migration increases this year but remains at a subdued pace near 33,000 persons before moving above 40,000 persons by 2016.
The fl ow of landed immigrants to B.C. has deceler-ated since 2010, which has likely refl ected a com-bination of weakness in both the local and broader global economy as fewer skilled-workers and foreign-investor class of immigrants entered the province. While the investor stream has since been shut down by the federal government, international fl ows are forecast to shift higher as improving economies drive higher global mobility.
On the interprovincial front, B.C. has been on the los-ing end over the past two years with more residents relocating to other provinces. More specifi cally, resi-dents have left for “greener” economic pastures of Alberta and Saskatchewan, outnumbering net gains from the rest of Canada. Stronger economic activity in the prairies will continue to draw B.C. residents this year but the drain will diminish. Strengthen-ing economic growth and more job opportunities should keep residents within B.C. borders and attract Canadians from other parts of the country in 2015 onwards.
Although population expansion is low, net household formation climbs to above 30,000 per year refl ect-ing agect-ing demographics and smaller household size. Demographic trends suggest population gains will be led those in the 25 to 34 and 55-plus age cohorts. The former is a key age group for household formation as children move out of the family home or cohabitate, providing demand for both
homeowner-ship and rental accommodations, while growth in the latter may provide greater demand for condominium product.
Rising mortgage rates are expected to lean against the housing market over the forecast horizon but will be less of a drag than previously anticipated. The yield curve has fl attened with a weaker Canadian economic outlook and markets have responded to expectations of a delayed Bank of Canada rate hike.
2006 2009 2012 2015 0.6 0.8 1.0 1.2 1.4 1.6 Population Growth (%)
Source: Landcor, CMHC and C1CU
B.C. Population Outlook 2006 2009 2012 2015 -20 0 20 40 60 80 Net Migration (000s)
Total Int'l Inter-prov FORECAST
2000/01 2002/01 2004/01 2006/01 2008/01 2010/01 2012/01 2014/01 4.0 5.0 6.0 7.0 8.0 9.0 Per Cent
Source: Statistics Canada and C1CU. note: monthly
Mortgage Rate - Posted 5-Year Fixed
2008 2010 2012 2014 2016 -4.0 -2.0 0.0 2.0 4.0 6.0 Per Cent GDP Employment
Source: Statistics Canada and Central 1 Credit Union.
Real GDP and Employment Growth
While the trend has perked up and year-over-year gains are strong, absolute sales levels remain a disap-pointment. Provincial sales held below the 10-year average — a level already weighed down by fi ve years of post-recession weakness. Sales have rebounded off the recent trough but near the lowest levels since the late 1990s when adjusted for the growing popula-tion.
Although record-low mortgage rates will boost activ-ity through the summer months, tempered demand is expected to persist.
While MLS® data is the most often quoted bench-mark and more timely, we forecast existing home indicators using data provided by Landcor Data Corporation. Our data set is based on actual arm’s-length title transfers in the province, consistent with standard economic geographies and allows direct comparisons of median home values and sales by product type.
Total resale transactions in the province are forecast to reach about 75,000 units this year led by a gain in the Greater Vancouver region. While this is a 13 In fact, the housing market has received a boost from
lower borrowing costs this year, which has enhanced affordability. While the medium-term outlook is still for rising borrowing costs, mortgage rates have ratcheted lower. Buyers have seen the posted
fi ve-year rate tumble to a record-low 4.79 per cent, marking a decline of 45 basis points (bps) from year-end. Note that these are posted rates — contract rates are much lower, with some lenders offering
fi ve-year rates below three per cent. Mortgage rate cuts refl ect a combination of lower funding costs in bond markets and a bid to increase market share by
fi nancial institutions in a soft housing market. Lower borrowing costs provide uplift to home sales through the summer as prospective buyers jump off the fence to take advantage of affordability improvements. We do not expect these rates to last beyond the fall. Ultra-low mortgage rates, which further eased during the fi rst quarter, are expected to rise over the forecast horizon. The posted fi ve-year rate is forecast to stay below fi ve per cent through 2014, with a trend to about 5.5 per cent by the end of 2015. An average of 5.75 per cent is forecast for 2017.
While fi nancing costs will outpace income gains and have a dampening effect on activity, it will not cause a market correction. Higher interest rates will refl ect improving economic conditions that drive higher consumer confi dence, incomes and employment. There are prior instances when housing sales and prices have risen in the face of higher mortgage rates when accompanied by a stronger economy.
In addition to a rising rate environment, successive rounds of mortgage insurance policy tightening in recent years remain a hurdle for fi rst-time buyers as well as the move-up segments of the market. A decline in purchasing power for fi rst-time buyers and
fl at condominium prices has lowered mobility in the entry-level segment of the market, which will remain a constraint to overall sales activity over the coming years.
Resale housing market
Existing home sale trends were uneventful in early 2014 as the decelerating pattern going back to late-2013 persisted. However, mortgage rate cuts have proven to be a powerful catalyst in arresting the slide, incenting more buyers to pull the trigger. Sales through the MLS® system have shifted higher since the end of the fi rst quarter led by larger urban areas in the Lower Mainland, Capital and Central Okanagan regions. 2007 2008 2009 2010 2011 2012 2013 2014 2,000 4,000 6,000 8,000 10,000 Units
MLS® Sales Rolling 10-year average
Source: CREA, and Central 1 Credit Union
MLS® Sales, Monthly 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017 10 15 20 25 30 35
Transactions per 1000 persons
Source: Landcor Data Corp., Statistics Canada and Central 1 Credit Union
fi rst quarter — a gain of about 15 per cent from year-ago levels. Shifts in geographic sales composition and product quality contributed to the price upshift with stronger sales and price growth concentrated in Vancouver city, but constant-quality price metrics like the CREA home price index also point to signifi cant detached home price growth of around four per cent from a year ago. The market has proven exceptionally rewarding to single-detached homeowners in recent years, with the regional median value climbing from about $600,000 in 2009.
In contrast, growth in apartment condo and attached unit values has been more modest. While sales were also up sharply on a year-over-year basis, gains were lower and the trend eased into early 2014 before turning recently higher. Prices have followed suit, trending range-bound in recent years.
Diverging single- and multi-family home prices refl ect both short- and long-term factors. Rising detached home prices refl ects a scarcity of developable land in Greater Vancouver as the geographically constrained land base remains under pressure from a rising population. Meanwhile, the fi nancial consideration of detached homes with income-generating suites has also contributed to gains. In contrast, price growth in the multi-family market has been quelled by tighter housing fi nance policies and some excess building in recent years. Mortgage insurance and policy tighten-ing in recent years has curtailed purchases by lower-equity entry-level buyers, leading to a short-term dampening of condo markets in high-priced regions like Greater Vancouver.
Home sales and prices are forecast to rise over the next few years as demand is lifted by positive economic growth and immigration, while land appreciation continues. Economic growth is be-ing lifted by substantial commercial construction, per cent increase from a year ago, it compares to a
period of exceptionally low sales in both 2012 and 2013 near 65,000 units. From 2000 to 2010, annual sales averaged above 85,000 units.
Sales growth is recorded across product markets this year with a stronger annual gain in the detached housing sector. We expect sales to rise at a pace of about fi ve per cent per year from 2015 through 2017. Annual gains are signifi cant, but levels remain subdued in most areas of the province with provincial sales of about 88,000 by 2017. Home sales will be constrained by a modest pace of population and economic growth in the near-term, a rising interest rate trend and the tighter mortgage insurance rule environment.
The upshift in sales this year boosts the provincial median price by about three per cent to $396,000 but is driven mainly by upside pressure in the Greater Vancouver market, which has seen a signifi cantly stronger detached housing demand and pricing con-ditions. Greater Vancouver and the Lower Mainland as a whole largely dictate median provincial price patterns given the region’s annual share of provincial sales fl uctuates between 50–60 per cent. Provincial price growth averages slightly less than three per cent per year through 2017, which falls short of the historical long-term average gain of more than fi ve per cent due to modest demand — growth averaged more than eight per cent per year in the 2000s. While the provincial price level is expected to rise modestly, regional outlooks differ due to varying economic and housing market conditions.
Strengthening demand and land appreciation to underpin price growth in Lower Mainland
The Lower Mainland-Southwest, anchored by Greater Vancouver, provides most of the provincial sales and price uplift this year. A relatively stronger labour market performance in recent years and temporary downshift in mortgage rates fuels a signifi cant rebound over a weak 2013. In particular, sales in Greater Vancouver climbed 16 per cent to nearly 39,000 units. While sales remain below mid-2000s highs, forecasted activity will be the highest since 2009. With market conditions in the Greater Vancouver in balance, higher sales drive stronger than previously anticipated price growth.
Detached home activity has been surprisingly resilient as buyers have taken the region’s high prices in stride. Sales growth was up sharply early this year, bidding up the median price level to above $820,000 in the
2000 2002 2004 2006 2008 2010 2012 2014 2016 0 10 20 30 40 50 60 70 Units (000s) 200 300 400 500 600 $(000s)
Sales (L) Median Price (R)
Source: Landcor and Central 1 Credit Union
Resale Market Forecast, Lower Mainland Southwest
catering to more recreational and retiree demand, including the southern interior and Vancouver Island, are expected to benefi t from a positive economic growth cycle and a lower Canadian dollar. The former will help drive discretionary demand for vacation property and incent older individuals to revisit retirement plans. Meanwhile, the low Canadian dollar provides a disincentive to purchase U.S. recreational property, particularly given strengthening prices south of the border. Declining new home inventory will also navigate buyers to what is still an over-stocked existing housing market.
The Thompson-Okanagan housing market continues to improve after the recessionary tumble, but sub-regional trends are mixed. The region, which spans from Kamloops-centred Thompson-Nicola through the Okanagan region anchored by Kelowna, Vernon and Penticton, is expected to post a third consecutive sales increase this year, reaching 10,000 units and about 9.5 per cent above 2013, but remain at about two-thirds of mid-decade levels. Sales growth is led by Kelowna-anchored Central Okanagan, which has likely seen a boost in local demand from interest rate including transportation infrastructure and offi ce
towers, while a number of major tech companies are expanding or settling in the area. Mortgage rates are a drag, but will not offset gains. Greater Vancouver home values are forecast to rise by more than three per cent per year over the forecast period to about $595,000 by 2017, led by stronger detached market growth of about four per cent. Multi-family sales will rise at a stronger pace than detached given lower price points, but price growth will be more modest at about two to three per cent per year.
Price growth patterns point to a widening gap between housing ladder rungs. Detached home prices will continue to be bid up over the long term as underlying land values appreciates — a predictable outcome of rising population and a limited land base. Developers will continue to package and convert existing residential and commercial lots to construct higher-density product, bidding land and home prices higher. While there is no stopping upward pressure on detached and duplex prices, condo apartments grow at a slower pace as municipalities increase density allotments and builder intensify use of the land base through taller and larger structures with a deeper breadth of options for family housing. Sales growth in theFraserValley will be comparable, if not stronger over the forecast period but is re-bounding off a low base. Sales were half of mid-2000 highs in 2013, refl ecting a stagnant population and generally subdued labour market. Home values in the region, which is anchored by Abbotsford-Mission and Chilliwack, are forecast to rise at a pace of about one per cent per year over the period.
Parts of the Fraser Valley have increasingly become bedroom communities for the Greater Vancouver area given the attractiveness of lower home prices, particularly for those commuting to Surrey and Lang-ley. This trend decelerated with the broader popula-tion and economic slowdown and stability in Greater Vancouver pricing. Population growth was low at 0.6 per cent in 2013, compared to an average gain of about 1.5 per cent over the past decade. Regional employment growth has been positive over the past year, but unemployment rates in both Chilliwack and Abbotsford remain elevated.
Interior and Vancouver Island prices to remain stagnant
Regions hard hit by the recession downturn in discre-tionary spending are expected to record a substantial pickup in sales over the forecast period, but given a low base, levels will remain relatively weak. Regions
2005 2008 2011 2014 2017 0 200 400 600 800 1,000 $ (000s) Detached Apartment Attached
Source: CMHC and Central 1 Credit Union.
Greater Vancouver Resale Price by Product
2005 2009 2013 2017 200 300 400 500 600
Detached - Apartment Price Differential $(000s)
2000 2002 2004 2006 2008 2010 2012 2014 2016 0 5 10 15 20 Units (000s) 100 150 200 250 300 350 $(000s)
Sales (L) Median Price (R)
Source: Landcor and Central 1 Credit Union
Resale Market Forecast, Thompson-Okanagan
Housing markets on the Island continue to face varying challenges. Labour market conditions have weakened this year with an employment downswing erasing the modest gains observed in recent years. A combination of low population growth in the Capital (Victoria) and Nanaimo areas and declines elsewhere on the Island, weak recreation and retiree demand and government budget restraints continued to weigh. A gradual recovery in discretionary purchases in recreational property and pickup in retiree demand will provide uplift over the forecast period.
Annual growth in Vancouver Island sales is predicted to remain solid over the forecast period and trend to about 14,700 units by 2017. This will mark a modest performance, but below the range of 18,000 to 20,000 units observed from 2005 through 2007. The median home value for the region is forecast to remain range-bound through 2016 near $335,000. Excess inventory of both new and existing units, fuelled by overbuilding prior to the recession, will temper price growth despite rising sales. However, oversupply weighs less on prices going forward. Median price growth in the Capital region is expected to outpace the island slightly as a whole.
cuts. Median price levels are forecast to hold steady at $314,000.
While labour market conditions in the region have improved over the past year, demand remains constrained by recession-induced population con-tractions outside the Central Okanagan. A recovery in tourism and recreational property markets — previously propped up by from Alberta and Greater Vancouver buyers — has proven elusive, although conditions for a pickup in discretionary activity have improved.
Further recovery in the housing market is expected. Sales growth in the Thompson-Okanagan is forecast to average more than 7.5 per cent per year from 2015 to 2016, pushing total sales to near 12,000 units. Inventory drawdown will continue, providing less competition for the existing home market, but median price growth will be held back by persistence of oversupply, particularly in the southern Okanagan and Thompson-Nicola regions. While excess inventory abates, the median value is expected to grow by an average of only 1.5 per cent per year through 2017 following an extended period of stagnation since 2008.
Similar patterns are expected in the Kootenay,
which also experienced easing population in recent years and a dearth in recreational housing demand compared to the pre-recession era. Home sales have rebounded since an early-2013 pullback and annual levels are forecast to jump nearly 10 per cent but remain at about half of mid-2000 levels. Sales continue to trend higher to about 3,100 units by 2017. The median home value, which has stagnated since 2008, will vary little over the coming period. Regional housing oversupply, a trait shared with other markets oriented towards recreational demand, will weigh on prices this year before mild gains take root in 2015 onwards. Price levels will remain range-bound through the forecast period near $235,000, pointing to nearly a decade of stagnant values.
Shifting westward and over the Salish Sea, home sales on Vancouver Island are expected to rise for a second consecutive year following fi ve consecutive annual declines, but low demand and soft market conditions and supply excesses contribute to a fl at price profi le. Home sales are forecast to rise about 7.5 per cent this year, with price levels down about one per cent. Sales growth will be concentrated in the larger urban areas of Victoria and Nanaimo, with weaker performances elsewhere in the region.
2000 2002 2004 2006 2008 2010 2012 2014 2016 0 1,000 2,000 3,000 4,000 5,000 6,000 Units 50 100 150 200 250 $(000s)
Sales (L) Median Price (R)
Source: Landcor and Central 1 Credit Union
Resale Market Forecast, Kootenay
2000 2002 2004 2006 2008 2010 2012 2014 2016 0 5 10 15 20 25 Units (000s) 100 150 200 250 300 350 400 $(000s)
Sales (L) Median Price (R)
Source: Landcor and Central 1 Credit Union
Resale Market Forecast, Vancouver Island/Coast
economy is mixed. Mining is under strain with two projects recently put on hold, but the Burns Lake sawmill reconstruction is underway.
Strong pricing conditions in both areas, and a pickup in North Coast sales, is curiously at odds with weak local employment and population growth trends. However, this may refl ect a signifi cant mobile or tem-porary workforce which, at least in Terrace and Prince Rupert (where data is available), has lowered vacancy rates and sharply boosted rents, driving values — but not necessarily sales — higher. In addition, the region may be seeing increased investor interest due to potential economic growth in the region. Sales and prices levels are forecast to rise in the Nechako and remain elevated in the North Coast. New projects and associated economic growth will drive in new residents into the region, boosting demand for exist-ing and new home construction.
The Cariboo housing market has been comparatively weaker than the rest of the northern region. The region, anchored by Prince George and municipalities including such as Quesnel, Mackenzie and Williams Lake, has been slow to recover following the forestry
Northern B.C. housing markets to outperform rest of province
Housing markets in B.C.’s northern regions are expected to outperform the provincial trend over the forecast period. Despite weakness in the mining development and activity due to a down-cycle in re-lated commodity prices, the regional housing market, which spans the North Coast and Nechako, Cariboo and Northeast regions, will benefi t from a positive investment cycle related to major project com-mencements. Although the path, timing and degree to which the north prospers remains uncertain, an upshift in economic conditions and expected invest-ments in LNG terminals and pipelines, port expansion, the oil and gas fi elds and positive momentum for forestry provides the conditions for strengthening home sales and further price appreciation.
While the north is often referred to in a single breath, there have been clear differences among regional markets performances in recent years. On one end, the North Coast, which is anchored by Prince Rupert, Kitimat and Terrace, has observed booming growth in home sales and price levels. The region has benefi t-ted from stronger port activity, pre-construction activity related to LNG and the Rio Tinto Alcan modernization project. Sales have recovered from a post-recession lull, rising 20 per cent last year to about 1,050 units and a third successive year in which sales have risen by 20 per cent or more. Price levels have similarly followed suit, surging more than 21 per cent last year to $185,000. The median price has climbed more than 35 per cent since 2009.
In the Nechako, which counts Fort St. James, Smith-ers and Vanderhoof as its key municipalities, sales remain stunted near post-recession lows, but pricing has continued to scale new heights, reaching a median value of $195,000 last year. The regional
2000 2002 2004 2006 2008 2010 2012 2014 2016 0 100 200 300 400 500 600 700 800 Units 80 100 120 140 160 180 200 220 $(000s)
Sales (L) Median Price (R)
Source: Landcor and Central 1 Credit Union
Resale Market Forecast, Nechako
1995 2001 2003 2005 2007 2009 2011 2013 2015 2017 0 250 500 750 1,000 1,250 1,500 Units 80 100 120 140 160 180 200 220 $(000s)
Sales (L) Median Price (R)
Source: Landcor and Central 1 Credit Union
Resale Market Forecast, North Coast
2000 2002 2004 2006 2008 2010 2012 2014 2016 0 1,000 2,000 3,000 4,000 5,000 Units 80 100 120 140 160 180 200 220 $(000s)
Sales (L) Median Price (R)
Source: Landcor and Central 1 Credit Union
sector downturn over the past decade, which has coincided with a halving of sales from mid-decade levels. A positive outlook for wood product demand will be partially negated by the long-term impacts of the mountain pine beetle epidemic on the regional supply. Nonetheless, we expect to see modest sales and price gains in the Cariboo, refl ecting the growing importance of the Prince George area as a northern gateway and hub, which will keep resale transactions on an up-trend. Sales in the Cariboo are forecast to rise three per cent this year before averaging about nine per cent each year from 2015 to 2017, but sales levels will remain subdued. Median price levels rise one per cent this year and about two per cent per year thereafter.
Northeast B.C., which includes Fort St. John, Dawson Creek and their surrounding areas, has experienced modest sales volumes but persistent price apprecia-tion in recent years. While resale market trends have been similar to the Nechako, local demand has been robust with population levels rising across the North-east as households have been drawn to the region’s strong energy economy despite some weakness in the met coal mining sector. Resale transactions are still well below mid-2000 peaks but demand has seemingly shifted directly into the new home market with housing starts and building permits trending near the highest level in more than two decades. Elevated demand has continued fuel upside pressure on prices, which rose another seven per cent in 2013. Since 2009, the median value is up nearly 30 per cent. Regional housing is expected to remain robust with LNG projects in the northwest driving more demand for drilling in the Northeast, boosting labour demand and incomes. Price levels are forecast to trend to more than $320,000 by 2017, marking a 16 per cent gain from 2013.
New Home Construction
B.C. housing starts are forecast to hold level this year despite positive resale market momentum and strong early-year growth in new home construction. Year-over-year growth in housing starts has thus far been phenomenal with urban markets posting a 14 per cent year-to-date gain through May, led by higher detached home activity. However, builders will be hard-pressed to maintain this pace given that growth refl ects a low base in early-2013 and the trend has shown signs of deceleration. Builders remain cau-tious amidst modest demand and elevated levels of new and existing home inventories. A recent slide in building permit volume, which fell to a two-year low in April, points to a further slowing in starts.
Annual housing starts are forecast to hold steady at about 27,200 units with a moderate pull-back in the Lower Mainland and declines in Vancouver Island markets. The island, as well as the central and southern interior regions, will continue to build at a low pace, although Thompson-Okanagan starts are expected to rise this year on higher Kelowna demand and declining inventory.
2000 2002 2004 2006 2008 2010 2012 2014 2016 0 500 1,000 1,500 2,000 Units 0 50 100 150 200 250 300 350 $(000s)
Sales (L) Median Price (R)
Source: Landcor and Central 1 Credit Union
Resale Market Forecast, Northeast
2000 2002 2004 2006 2008 2010 2012 2014 2016 10 15 20 25 30 35 40 45 Dwellings (000s)
Source: CMHC and Central 1 Credit Union.
Housing Starts, B.C. FORECAST 2000 2002 2004 2006 2008 2010 2012 2014 0 1 2 3 4 5 Dwellings (000s)
Source: CMHC and Central 1 Credit Union. note: large urban markets
Nonetheless, the spring report points to a tighten-ing of rental conditions relative to a year ago with signifi cant vacancy rate declines in the province’s large urban areas, as well as in northern B.C. and some recreational markets. Lower vacancy rates refl ect population gains and region-specifi c economic growth while tighter mortgage insurance rules and a tempered labour market have also delayed homeownership for some low-equity buyers. While conditions have led to resurgence in rental market construction in recent years — more than 10 per cent of urban housing starts were rental product over the past three years, compared to less than fi ve per cent from 2005 to 2010 — the gains generally kept pace with demand.
The provincial vacancy rate for purpose-built apart-ment and townhomes is forecast to hold range-bound over the forecast horizon, easing to 2.3 per cent this year from 2.5 per cent in 2013, and hold above two per cent through 2017. While sales pick up, rental demand will remain strong due to afford-ability constraints to homeownership for fi rst-time buyers.
Bryan Yu
Economist, Central 1 Credit Union
byu@central1.com www.central1.com 604.742.5346
Starts are forecast to trend higher over the forecast horizon due to economic and demographic factors but below household formation levels as high, albeit declining, inventory and rising interest rates hold back activity. Regions outside the Lower Mainland-Southwest are expected to show a stronger pickup in new construction as they rebound off exceptionally weak post-recession levels contributing to relatively stronger growth in detached housing starts. Provin-cial starts are forecast to trend to a pace of about 30,000 units by 2016 but remain well below cycle highs observed in 2007. Household formation is forecast to average about 31,000 from 2014 to 2017. A period of soft new home construction means the residential sector will be a damper on the economy this year. Total residential investment is forecast to grow by two per cent this year, despite slightly stronger activity related to renovations and acquisition-related costs. Next year’s bump in housing starts will drive higher investment spending before moving back to an annual growth rate of above three per cent through 2017.
Rental Market
Rental market conditions vary signifi cantly across the province with larger urban markets such as Metro Vancouver, Victoria and Kelowna typically exhibiting lower vacancy rates and higher rents, refl ecting higher population growth and diversifi ed economies. Areas with project or resource-related booms, includ-ing the North Coast and the Northeast have recorded low vacancies, although, conditions can fl uctuate signifi cantly. In contrast, areas with stronger depen-dence on industries like tourism and forestry exhibit higher vacancy rates.
Rental market data is less timely than new home construction and resale market data with estimates generated by CMHC compiled only twice a year.
2000 2002 2004 2006 2008 2010 2012 0 1,000 2,000 3,000 4,000 5,000 Units 0% 5% 10% 15% 20% 25% 30% Per Cent
Rental Starts (L) Share of Total Starts (R)
Source: CMHC and C1CU. latest: 2013
Rental Housing Starts, Annual
2000 2002 2004 2006 2008 2010 2012 2014 2016 5 10 15 20 25 30 Dwellings (000s) Detached Multi-family
Source: CMHC and Central 1 Credit Union.
Housing Starts by Product, B.C.
Appendix
Housing Forecast - table 2 . . . .10
Real Residential Investment . . . 11
Annual Residential Resales . . . .12
Median Annual Residential Price . . . .13
Total Housing Starts . . . .14
Greater Vancouver Resales . . . .14
Forecast Summary . . . .15
Population Components . . . .15
Mortgage Rates . . . .15
Housing Forecast - table 2
2012 2013 2014 2015 2016 2017
Resale Market
Transactions All Units 63,798 66,250 75,075 79,150 84,075 88,195
% change -11.1 4.4 13.3 5.4 6.2 4.9 Detached 34,568 35,725 41,000 42,500 44,000 45,600 % change -9.9 4.2 14.8 3.7 3.5 3.6 Condo Apartment 15,957 16,712 19,000 20,800 23,000 24,500 % change -14.8 4.8 13.7 9.5 10.6 6.5 Row/Duplex 9,892 10,297 11,300 12,200 13,000 13,700 % change -10.8 4.4 9.7 8.0 6.6 5.4
Resale Median Price All Units 382,000 384,000 396,000 406,000 418,000 429,000
% change -4.5 0.8 3.1 2.5 3.0 2.6 Detached 470,000 475,000 501,000 514,000 530,000 542,000 % change -7.3 1.1 5.5 2.6 3.1 2.3 Condo Apartment 314,500 315,000 320,000 329,000 337,000 345,000 % change -3.2 0.0 1.6 2.8 2.4 2.4 Row/Duplex 348,000 347,500 357,000 365,000 372,000 382,000 % change -5.4 0.1 2.7 2.2 1.9 2.7 MLS® Activity Sales 67,637 72,936 80,000 84,000 88,000 92,000 % change -11.8 7.8 9.7 5.0 4.8 4.5 Listings 158,888 147,209 153,000 159,000 164,000 168,000 % change -1.2 -7.4 3.9 3.9 3.1 2.4 Average Price 514,836 537,414 566,000 570,000 580,000 600,000 % change -8.3 4.4 5.3 0.7 1.8 3.4
Housing Starts, Units Total 27,465 27,054 27,200 28,300 29,300 31,000
% change 4.0 -1.5 0.5 4.0 3.5 5.8
Single-Detached 8,333 8,522 9,300 9,500 9,700 10,000
% change -6.0 2.3 9.1 2.2 2.1 3.1
Multi-family 19,132 18,532 17,900 18,800 19,600 21,000
% change 9.1 -3.1 -3.4 5.0 4.3 7.1
Rental Vacancy Rate Vacancy Rate 2.8% 2.5% 2.3% 2.2% 2.2% 2.1%
Real Residential Investment ($2007 Millions): British Columbia
2012 2013 2014 2015 2016 2017
Real Residential Investment (Millions) 18,490 18,346 18,709 19,311 20,037 20,970
% Change 9.1 -0.8 2.0 3.2 3.8 4.7
Total New Dwellings 8,521 8,395 8,520 8,922 9,304 9,800
% Change 12.8 -1.5 1.5 4.7 4.3 5.3
Renovations 7,303 7,256 7,400 7,545 7,801 8,107
% Change 4.5 -0.6 2.0 2.0 3.4 3.9
Total Acquisition Costs 2,434 2,459 2,550 2,600 2,680 2,801
% Change 12.1 1.0 3.7 2.0 3.1 4.5
Annual Residential Resale Transactions by Development Region
2012 2013 2014 2015 2016 2017 Vancouver Island/Coast 10,796 11,427 12,300 13,400 14,200 14,700 % change -5.9 6.3 7.6 8.9 6.0 3.5 Lower Mainland/Southwest 37,561 38,582 45,000 46,700 49,400 51,700 % change -17.7 3.4 16.6 3.8 5.8 4.7 Thompson/Okanagan 8,394 9,122 10,000 10,700 11,600 12,400 % change 5.5 9.1 9.6 7.0 8.4 6.9 Kootenay 2,237 2,368 2,600 2,750 2,900 3,100 % change 4.1 6.3 9.8 5.8 5.5 6.9 Cariboo 2,193 2,174 2,250 2,500 2,700 2,900 % change 5.1 -0.7 3.5 11.1 8.0 7.4 North Coast 880 1,049 1,300 1,350 1,350 1,325 % change 26.8 20.0 23.9 3.8 0.0 -1.9 Nechako 453 385 450 500 575 620 % change -1.5 -14.4 16.9 11.1 15.0 7.8 Northeast 1,284 1,143 1,175 1,250 1,350 1,450 % change 2.1 -11.0 2.8 6.4 8.0 7.4 Province 63,798 66,250 75,075 79,150 84,075 88,195 % change -11.1 4.4 13.3 5.4 6.2 4.9Select Regional Districts
2012 2013 2014 2015 2016 2017 Greater Vancouver 32,433 33,477 38900 40500 43000 45000 % change -19.7 3.9 16.2 4.1 6.2 4.7 Capital 4,886 5,054 5,600 6000 6500 6,800 % change -4.7 3.8 10.8 7.1 8.3 4.6 Central Okanagan 3,064 3,452 3800 4000 4200 4350 % change 5.0 13.0 10.1 5.3 5.0 3.6 Fraser Fort-George 1,367 1,427 1450 1580 1700 1800 % change 0.4 4.5 1.6 9.0 7.6 5.9 Fraser Valley 3,793 3,744 4300 4600 4900 5200 % change -5.2 -1.1 14.9 7.0 6.5 6.1 Nanaimo 2,504 2,718 3000 3150 3300 3500 % change -5.2 8.9 10.4 5.0 4.8 6.1 Thompson-Nicola 2,005 2,139 2200 2400 2650 2850 % change 2.5 7.1 2.9 9.1 10.4 7.5
Median Annual Residential Price by Development Region
2012 2013 2014 2015 2016 2017 Vancouver Island/Coast 335,000 332,000 330,000 334,000 337,000 343,000 % change -1.5 -0.9 -0.6 1.2 0.9 1.8 Lower Mainland/Southwest 472,000 480,000 497,000 512,000 527,000 543,000 % change -3.3 2.1 3.5 3.0 2.9 3.0 Thompson/Okanagan 315,000 313,000 314,000 317,000 322,000 328,000 % change 0.0 -0.6 0.3 1.0 1.6 1.9 Kootenay 238,000 236,250 230,000 233,000 236,000 239,000 % change 1.7 -0.7 -2.6 1.3 1.3 1.3 Cariboo 197,308 200,000 202,000 206,000 210,000 214,000 % change 2.2 1.5 1.0 2.0 1.9 1.9 North Coast 151,500 185,000 188,000 192,000 200,000 210,000 % change 8.2 21.7 1.6 2.1 4.2 5.0 Nechako 172,000 195,000 190,000 195,000 200,000 206,000 % change 5.4 14.0 -2.6 2.6 2.6 3.0 Northeast 259,750 277,500 294,000 305,000 315,000 322,000 % change 10.5 6.7 5.9 3.7 3.3 2.2 Province 382,000 384,000 396,000 406,000 418,000 429,000 % change -4.5 0.8 3.1 2.5 3.0 2.6Select Regional Districts
2012 2013 2014 2015 2016 2017 Greater Vancouver 505,000 515,000 542,000 557,000 575,000 595,000 % change -2.9 3.0 5.2 2.8 3.2 3.5 Capital 445,000 432,750 434,000 440,000 449,000 458,000 % change -1.5 -2.8 0.3 1.4 2.0 2.0 Central Okanagan 369,000 357,500 367,000 371,000 378,000 383,000 % change -0.3 -3.1 2.7 1.1 1.9 1.3 Fraser Fort-George 210,000 213,000 216,000 218,000 225,000 232,000 % change 2.8 1.5 1.4 0.9 3.2 3.1 Fraser Valley 320,000 319,500 322,000 325,000 329,000 335,000 % change 3.9 -0.2 0.8 0.9 1.2 1.8 Nanaimo 308,000 305,000 305,000 307,000 311,000 315,000 % change -3.0 -1.0 0.0 0.7 1.3 1.3 Thompson-Nicola 295,000 298,000 292,000 295,000 300,000 303,000 % change 2.3 0.8 -2.0 1.0 1.7 1.0
Total Housing Starts by Development Region
2012 2013 2014 2015 2016 2017 Vancouver Island/Coast 3,173 2,835 2,650 2,900 3,050 3,150 % change -0.7 -10.7 -6.5 9.4 5.2 3.3 Lower Mainland/Southwest 19,922 19,988 19,300 19,700 20,500 22,000 % change 5.8 0.3 -3.4 2.1 4.1 7.3 Thompson/Okanagan 1,645 1,865 1,975 2,200 2,300 2,350 % change -6.7 13.4 5.9 11.4 4.5 2.2 Kootenay 73 82 65 80 90 105 % change -2.7 12.3 -20.7 23.1 12.5 16.7 Cariboo 301 276 250 300 350 400 % change 26.5 -8.3 -9.4 20.0 16.7 14.3 North Coast 23 30 40 50 65 65 % change -23.3 30.4 33.3 25.0 30.0 0.0 Northeast 361 578 500 490 475 475 % change 63.3 60.1 -13.5 -2.0 -3.1 0.0 Urban B.C. 25,498 25,654 24,780 25,720 26,830 28,545 % change 4.7 0.6 -3.4 3.8 4.3 6.4Total B.C. Housing Starts* 27,465 27,054 27,200 28,300 29,300 31,000
% change 4.0 -1.5 0.5 4.0 3.5 5.8
* includes rural areas
Source: Canada Mortgage and Housing Corporation, Central 1 Credit Union Forecast
Greater Vancouver Resale transactions
2012 2013 2014 2015 2016 2017 All Units 32,205 33,477 38,900 40,500 43,000 45,000 % change -20.0 3.9 16.2 4.1 6.2 4.7 Detached 14,572 15,205 18,000 17,900 18,200 18,500 % change -23.3 4.3 18.4 -0.6 1.7 1.6 Condo Apartment 11,758 12,203 14,000 15,400 16,800 18,000 % change -17.7 3.8 14.7 10.0 9.1 7.1 Attached 5,528 5,730 6,500 7,000 7,600 8,300 % change -16.9 3.7 13.4 7.7 8.6 9.2
Greater Vancouver Resale Median Price
2012 2013 2014 2015 2016 2017 All Units 500,100 515,000 542,000 557,000 575,000 595,000 % change -3.8 3.0 5.2 2.8 3.2 3.5 Detached 723,000 755,000 810,000 837,000 870,000 902,000 % change -3.6 4.4 7.3 3.3 3.9 3.7 Condo Apartment 352,000 357,500 367,000 375,000 383,000 391,000 % change -1.5 1.6 2.7 2.2 2.1 2.1 Attached 415,000 415,000 423,000 433,000 445,000 460,000 % change -4.4 0.0 1.9 2.4 2.8 3.4
Economic Forecast Summary Table
2012 2013 2014 2015 2016 2017 Real GDP, % Change 1.5 2.0 2.4 2.7 3.7 4.7 Employment, % Change 1.7 -0.2 1.2 1.8 1.9 2.3 Unemployment Rate, (%) 6.7 6.6 6.4 5.9 5.8 5.1 Population, % Change 1.0 0.9 1.0 1.0 1.1 1.3 Housing Starts (000s) 27.5 27.1 27.2 28.3 29.3 31.0Personal Income, % Change 4.4 2.1 3.4 5.0 6.1 6.9
Consumer Price Index, % Change 1.1 0.2 1.6 2.3 1.7 2.0
Statistics Canada, Central 1 Credit Union Forecast
Population components: British Columbia
2012 2013 2014 2015 2016 2017 Population, 000s 4,543.3 4,582.0 4,625.5 4,672.0 4,724.4 4,783.8 % change 1.0 0.9 1.0 1.0 1.1 1.3 Net In Migration (000s) 32.6 27.4 33.6 37.1 43.5 51.0 Net International(000s) 35.3 35.2 34.9 33.3 37.9 43.6 Net Interprovincial (000s) -2.7 -7.9 -1.3 3.8 5.6 7.4
Statistics Canada, Central 1 Credit Union Forecast
Posted Fixed Term Mortgage Rates
2012 2013 2014 2015 2016 2017
Prime 3.00 3.00 3.00 3.05 3.55 4.10
1-Year 3.18 3.08 3.18 3.40 3.80 4.20
3-Year 3.91 3.74 3.78 4.05 4.40 4.70
5-Year 5.27 5.23 4.90 5.20 5.50 5.75
Source: Statistics Canada, Central 1 Credit Union Forecast
Terms
Published by the Economics Department of Central 1 Credit Union, 1441 Creekside Drive, Vancouver, B.C. V6J 4S7 © Central 1 Credit Union, 2011.
This work may not be reproduced in whole or part, by photocopy or other means, without permission of Central 1 Credit Union.
Economic Analysis of British Columbia (the “Analysis”) may have forward-looking statements about the future economic growth of the Province of B.C. and its regions. These statements are subject to risk and uncertainty. Actual results may differ due to a variety of factors, including regulatory or legislative developments, competition, technological change, global capital market activity and general economic conditions in Canada, North America or internationally. This list is not exhaustive of the factors that may affect any of the Analysis’ forward-looking statements. These and other factors should be considered carefully
and readers should not place undue reliance on the Analysis’ forward-looking statements.
The Analysis and Central 1 Credit Union disclaims any and all warranties, whether express or implied, including (without limitation) any implied warranties of merchantability or fi tness for a particular purpose. The Analysis and Central 1 Credit Union will not accept any responsibility for the reader’s use of the data and / or opinions presented in the Analysis, or any loss arising therefrom.
