Housing market demand boomed again in December as Multiple Listing Service (MLS) sales climbed in almost all regions to a record 9,735 homes.
The 2.6% increase over November marked the third straight monthly rise in provincial sales. December’s total was also 31% higher than the same month in 2014. The gain drove annual sales growth to 22% (102,500 units) – the highest since 2007. Strength in the provincial economy and employment, persistence of rock-bottom interest rates and millennials entering prime homeownership age have underpinned robust demand. The announcement of tighter mortgage insurance rules might also have pulled forward some sales. Housing momentum has largely been fuelled by accelerated sales growth in the Lower Mainland-Southwest markets and Vancouver Island, reflecting stronger economic trends. Challenging commodity prices led to modest gains in resource-oriented regions and for those with greater exposure to Alberta demand.
The 12% surge in annual average price to $568,400 partly reflects geography. The avalanche of demand in the Lower Mainland overwhelmed regional supply. Scant inventory drove a surge in prices last year, with the average price in December up 20%, year-over-year.
Higher demand is also driving price growth in Vancouver Island markets, including Victoria. Year-over-year constant-quality price growth in Victoria was about 7%, and 5% elsewhere in the region. Similar indices are unavailable elsewhere in B.C., but price trends were more moderate.
We expect monthly home sales to cool in 2016 but the market to remain strong. Low inventories in the Lower Mainland will be one factor limiting sales growth despite high demand. Nonetheless, we expect annual sales to remain above 100,000 units, with a 4% growth in the average price.
Dovetailing with the MLS sales growth was another solid housing-starts performance. Urban starts climbed to a seasonally adjusted annualized rate of 33,300 units from a pace of 26,400 in November, led by a rise in Metro Vancouver multi-family units.
Annual starts rose 12% from 2014, with about half of the gain resulting from growth in Metro Vancouver. Relative gains were strongest in Victoria (52%) and Abbotsford-Mission (60%).
A heated resale market will drive further gains in new home construction activity. We expect housing starts to climb 9% this year. •
Bryan Yu is senior economist at Central 1 Credit Union.
