Following 2020’s V-shaped recovery, the BC housing market is set to see strong homebuyer demand carry over into 2021.
This high demand for housing coupled with low inventory will push the median price of a BC home up 5.6 percent to $618,000 in the new year, according to Central 1 Credit Union’s recently published housing market forecast. This 2021 increase is based on the credit union’s 2020 forecast that BC home prices will end the year up 9.3 percent for a median price of $585,000.
Central 1 Deputy Chief Economist Bryan Yu wrote that the first half of 2021 will be particularly strong from a sales activity and price growth standpoint, with some moderation to follow in the second half of the year thanks to increased inventory and a ramp up in lower-priced condo sales.
But the 2021 moderation described by Yu has a lot more to do with a return to normalcy and market balance than underlying weakness being exposed by the pandemic’s fallout and slowing down price growth.
First, the economist believes that more BC homeowners will be pushed to list their properties as a result of the impressive price growth they’ve observed through 2020. More owners may also be inspired to “test the market” with the end of the pandemic in sight, Yu wrote. These two connected factors would lead to a rise in for-sale inventory and ease some of the pressure on the supply side of the market, resulting in a slowdown in price appreciation.
The other moderating effect Yu predicts is a resurgent condo market for 2021 that will nudge price growth off of the elevated pace it’s recorded this year. After suffering significant sales declines through 2020, the condo segment will see stronger activity as immigration bounces back from its pandemic low point and international students return to the province.
Since condos command much lower prices than the single-family homes that are currently driving sales activity, overall home price growth will moderate due to the composition of homes being sold.
With mortgage rates expected to remain near record low levels, Yu sees little reason for a widespread pandemic-induced price correction for the BC market next year. That said, 2021 may present heated recreational property markets with a reality check.
“[I]n some markets where pandemic expectation drove recreational purchases, buyers may very well have been caught up in excessive biddings and prices could fall back as the economy returns closer to normal,” he wrote.
