BC home sales and prices are projected to drop this year compared to 2016 while market activity in Greater Vancouver is expected to continue warming up, despite federal and provincial policies introduced last year to cool the market.
Over 100,000 home sales in BC are forecast for this year, higher than the 10-year average of roughly 85,000 sales but down 10 per cent from a record 112,200 units sold in 2016, according to the British Columbia Real Estate Association’s (BCREA) 2017 second quarter housing forecast released today.
If the BCREA forecast is met, it will represent the third consecutive year of 100,000-plus home sales in the province.
Even though most BC regions are expected to see an increase in home prices this year, the average province-wide price is predicted to drop a modest one per cent to $683,500 compared to record highs reached last year.
The slight decline is largely attributed to an increase of lower priced condo and townhome sales, specifically in Greater Vancouver and the Fraser Valley, and does not accurately represent rising values of an average home in the province.
“We’re seeing more sales occurring outside of Metro Vancouver provincially, those homes are less expensive so that tends to bring the average price lower. Also, when we look within Vancouver, we’re seeing a much higher proportion of condominiums selling,” BCREA Chief Economist Cameron Muir tells BuzzBuzzNews.
And, with demand escalating across the province, the average price of a home in BC is projected to jump 5.2 per cent to $719,100 in 2018.
“Next year we’re seeing a little over 5 percent [price] increase province-wide and we’re going to experience kind of a shift back to seeing more regular patterns of home-buying activity,” says Muir.
“So, Vancouver garnering kind of their more typical share of provincial market activity, as well as likely to see some modest increase in the proportion of detached homes selling in the southwest region of the province,” he adds.
BC’s average home price is greatly influenced by activity in Vancouver, which remains one of the nation’s hottest markets.
In July 2016, Greater Vancouver saw a year-over-year home price gain of over 30 per cent, prompting the provincial government to implement a foreign-buyer tax for the region in an effort to cool the scorching market.
After the levy was introduced in August last year, home sales in the region dropped 19 per cent in that month. However, since the end of 2016, transactions have been on the upswing, as uncertain domestic buyers who had been sidelined by the new policy are now making their move.
“What we see now is those clouds of uncertainty have dissipated and we see overall sales activity has certainly trended much higher than what we would have originally anticipated,” says Muir.
With homebuyers opting to purchase more affordable condos and townhomes compared to expensive single-family homes in Greater Vancouver, BCREA predicts the average home price will drop 3.6 per cent to $980,790 this year compared to $1,017,228 in 2016.
However, with elevated demand, the price of a home is expected to begin climbing again by roughly 4 per cent to $1,022,000 in 2018.
Additionally, Victoria and Vancouver Island are expected to see price increases, as many buyers are fleeing to these regions to find more affordable housing options.
This year the average price of a home in Victoria is forecast to increase nearly 11 per cent to $578,200 and a further 2.1 per cent to $590,000 in 2018.
For Vancouver Island, the average price is predicted to rise 13 per cent to $380,000 this year and jump another 2.6 per cent to $394,000 next year.
Demand in the province appears to be fueled by BC’s booming economy.
Real GDP growth is projected to be at least 3 per cent or more this year which in turn is expected to increase employment levels, consumer spending and migration from other provinces.
However, fierce demand has not been met with sufficient supply across BC, specifically in the Lower Mainland.
This spring active listings have reached a 20-year low, creating upward pressure on home prices across most BC regions.
Even though 40,000 units are under construction across the province, most of these homes are condos which will take years to complete, adding more strain to an already tight market.