There’s more than just a glimmer of hope in the outlook for BC housing and its largest market, Vancouver, in 2020.
Last year ended on a sour note and the housing landscape in early 2019 wasn’t looking a whole lot better. But BC home sales began marching upward again after a frosty start to the year, rising in all but one month since February.
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“B.C.’s housing market is recovering much quicker than anticipated due to improved affordability and increased housing demand, driven by lower mortgage rates, first-time buyer incentives and population growth boosted by international migration,” writes Bryan Yu, deputy chief economist at Central 1 Credit Union, in a new market outlook that takes a deep dive into BC’s housing prospects from now until 2021.
The impact of the government policy onslaught aimed at tamping down the runaway housing market appears to have at least partially run its course. Making a strong case for the BC market’s resilience, Yu points out in the report that sales have risen despite the presence of several significant headwinds, including the mortgage stress test that came into effect in January 2018, provincial tax measures that have hit both local and foreign homebuyers, and a backdrop of uncertainty in the face of a tense global economic landscape.
However, as Yu notes, many of these factors have actually helped the market reverse course since early 2019. For instance, global economic uncertainty has pushed mortgage rates down to some of the lowest levels seen since mid-2017 and the federal government introduced the First-Time Home Buyer Incentive to offset the strain that the more restrictive mortgage stress test put on first-timers.
Pile on a strong labour market and population growth and you have a housing market that’s on much firmer footing than it was a year ago.
Yu writes that, after getting hit particularly hard during the downturn, Greater Vancouver home sales are dialling back up and are set to continue pushing higher into the new year.
“A growing number of buyers in the region have idled on the sidelines waiting for improvements in affordability following mortgage stress tests,” Yu writes. “Significant price declines over the past year and lower borrowing costs have buyers returning to the market among all housing types, particularly in the lower priced condominium sector. Upward sales momentum will likely continue into 2020.”
While the positive 2020 outlook provides welcome relief from the dark days of early 2019, the Central 1 report is not exclusively good news.
BC renters, particularly those living in Greater Vancouver, will see no price relief on the horizon thanks to decades of inadequate purpose-built rental building and a strong population growth.
Meantime, homebuilding, which kept up robust numbers throughout the downturn in 2018 and 2019, will experience a pull back in 2020. Central 1 projects a 16 percent drop in homebuilding for the year compared to the 2019 total, led by a decline in Greater Vancouver condo construction.
The pull back won’t last though. The credit union anticipates a march upwards in 2021 on the back of strong long-term economic fundamentals for the region.