B.C. housing market to remain “robust”: Central 1 Credit Union

Trade association for credit unions hikes outlook for B.C. and Vancouver home prices
The benchmark price of a Metro Vancouver home rose 32.6% in July compared with a year ago, according to the Real Estate Board of Greater Vancouver

B.C.’s housing market will be robust during the next two years, particularly in select regions outside Metro Vancouver, according to an August 24 report by Central 1 Credit Union, which is a payments processor and a trade association for its 42 member credit unions in B.C. and 72 in Ontario.

Central 1 predicts that the median B.C. home will have a price increase of 12% this year, to $480,000. Prices will then rise 4% next year and 3.5% in 2018, its report noted.

The benchmark price for Metro Vancouver homes rose $930,000 in July, or an extraordinary 32.6% more than a year ago, according to the Real Estate Board of Greater Vancouver (REBGV).

Central 1 expects what it described as the "median" Metro Vancouver home price to rise 4% in 2017 and 4.4% in 2018.

The forecast is good news for Central 1’s members given that credit unions, like banks, would be vulnerable if the housing market were to tank.

Moody’s Investors Service released a report in June that estimated that Canada’s mortgage lenders could have losses up to $17 billion if the country experienced a housing crash similar to the one in the U.S. eight years ago. 

Nonetheless, Central 1 is bullish.

“Since our spring forecast we have raised our outlook for prices, reflecting the strong momentum early in the year and tighter than expected market conditions,” said Bryan Yu, who is a senior economist with Central 1.

“We expect the pace of price hikes to slow through 2018.”

Central 1 acknowledged the controversial 15% provincial tax on foreigners who buy real estate in Metro Vancouver as a headwind on the market but Yu called it a “temporary but substantial short-term” drag in what has been a long-term trend of increasing sales.

He believes sales will be lower than previously forecast but still at what he considers an “elevated” level – this despite REBGV statistics that show that sales are plummeting.

Home sales in Metro Vancouver fell 18.9% in July, compared with the same month a year ago and 26.7% compared with June, according to REBGV numbers from earlier this month.

“The tax [on foreign buyers] puts further downward sales pressure on a market already slowing from spring fever,” Yu said. “However, strength in the local economy will underpin sales and prices.”

Central 1 expects the biggest home price increases to be outside Metro Vancouver.

Vancouver Island and southern Interior B.C. residential real estate market have rosier outlooks than previously anticipated, largely because those regions are not subject to the tax, Central 1 notes.

In-migration and low interest rates will drive sales in those regions and tightened inventory will lift prices, the Central 1 report said.

“The housing market is driven by continuing low interest rates, the growing economy and population increases,” Yu said.  “These fundamentals won’t change through 2018.”

gkorstrom@biv.com 

@GlenKorstrom 

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