BC Business
The credit union predicts that buyers will have a hard time matching sellers' expectations.
Life in B.C. is great—cool mountains, good food and a welcoming, diverse population are attractive enough features to convince anyone that it’s the place to be in Canada. But is it actually possible to live here?
Well, for some. But based on Vancouver-based Central 1 Credit Union’s latest report, B.C.’s housing market is standing on shaky ground this year. Low sales and fewer housing starts means that buyers are getting squeezed out of opportunities. But even as high interest rates tear down the market wall by wall, there’s still hope for conditions to stabilize by mid-2023.
Home values are predicted to continue plunging until then, lowering the annual provincial median transaction value from $780,000 in 2022 to $720,000 in 2023. “This annual decline masks a deeper peak-to-trough retrenchment of about 20 percent with more severe declines among markets in the Fraser Valley,” said Bryan Yu, chief economist at Central 1, in a release.
Central 1
Median resale home values are still higher than pre-pandemic levels, though, contributing to low sales in the province. Chilliwack, Abbotsford-Mission and Port Alberni experienced the sharpest downturn in sales, while the Okanagan and Vancouver Island were able to cruise along pre-pandemic levels, supported by demand from migration, retirees and lifestyle buyers.
Given market conditions, it might be surprising to learn that home listings have remained consistent. But this is likely due to low sales and stale listings, according to Central 1, as owners, noticing low availability, are reluctant to reduce prices (even as home prices undergo a much-needed correction after the pandemic). Overall price stickiness has translated to fewer sales as buyers are unable to match sellers’ expectations.
Rising mortgage rates and prices squeezed buyers out of the market in 2022. But that’s the thing about demand—it’s easily influenced by external factors. With the federal government targeting 500,000 immigrants per year by 2025, Yu identifies population growth to be a major driver of demand in the housing market this year.
“Population growth has surged and is expected to remain well above average over the coming years and drive both homeownership and rental market demand,” he added in the release. “Pent up demand will propel activity once interest rates descend.”
Last year marked a historical high as B.C.’s population grew by over 116,600 individuals. Moving forward, we can expect demand to facilitate market recovery as mortgage rates ease in the face of lowered home values and a rising number of newcomers. Sales are predicted to pick up in 2024—primarily steered by Metro Vancouver—with hopes of resale transactions (based on land title transfers) growing by almost 11 percent once demand surges. This would still pin current housing market activity within the 2015-2017 range, though.
Availability has always been a problem in B.C. Last year the province clocked in at 45,000 housing units (five percent lower than 2021), which includes long development times for multi-family construction. New construction is expected to decline by 15 percent in light of low sales and higher costs. In fact, in 2025, we can expect to see around 41,000 new units.
While existing tenants are somewhat protected by rent control regulations, this is obviously bad news for buyers and renters as supply falls, prices rise and more people become reluctant to vacate. As availability dwindles as turnover rents rise, it remains to be seen whether all those newcomers will be able to land a roof over their heads.