BC Real Estate Association Housing Forecast for 2018
You’d be hard pressed to find someone who would say that 2017 was a stagnant year when it came down to housing sales and policy. With that being said, let’s take a look at the forecast for 2018.
This information will focus on the Lower Mainland-Southwest region of the province which includes the Real Estate Board of Vancouver, the Fraser Valley Real Estate Board and the Chilliwack and District Real Estate Board. These areas account for approximately 60% of the housing demand in the province.
Related Story: Demand Strong in October for Langley and The Fraser Valley
Population growth is being fueled by both international and interprovincial migration, with growth slowing in Metro Vancouver in recent months and increasing in Abbotsford, as housing affordability and availability impact housing decisions. In addition, with Alberta’s increased economic performance, migrant flows from that province are expected to decrease.
Housing demand continues to support a strong-performing economy
The province is now four years into above trend growth, benefiting from rising employment and consumer confidence. Employment growth has trended near 3% in 2017, with the unemployment rate declining close to 4%. Tighter labour markets have led to rising wages and consumer confidence. This has been reflected in double-digit growth in retail sales, and strong housing demand.
A relatively low level of supply is keeping overall market conditions firmly in a seller’s market. The supply of homes for sale continues to remain at near-decade lows. Total active residential listings are down 5% over the past 12 months in the Lower Mainland. However, market conditions vary by product type with the detached market exhibiting relative balance, while the attached and apartment markets are significantly undersupplied.
Housing starts in Vancouver were up 40% last year
Home builders have taken notice of the dwindling supply and have ramped up production. Housing starts in Vancouver were up 40% last year and continue at an elevated pace, resulting in approximately 40,000 units currently under construction, 55% above the 2008 peak of 27,000 units. However, there is a significant lag between housing start and completion so multi-family completions are expected to climb 50% over the next several quarters, providing much needed supply to the market.
Rapid price escalation
Housing supply will continue to be supported by employment and population growth in 2018, but a higher interest rate environment and tighter mortgage qualifications will reduce demand. The region recently experienced two waves of rapid price escalation: detached homes in 2016 and multi-family homes this year. It is unlikely that home prices can maintain this degree of upward momentum much longer. Look for more balanced market conditions in 2018, as a surge in new home completions increases supply and reduced affordability tempers demand.
Overall, residential sales through the Real Estate Board of Vancouver, the Fraser Valley Real Estate Board and the Chilliwack and District Real Estate Board are expected to decline 8-11% in 2018, with average home prices increasing at a more modest 4-6%.
If you have questions about this forecast, the current market or the new mortgage rules, give us a call, we’d love to help!
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