Doomsayers foretelling the collapse of the residential real estate market in B.C. must ultimately hope for a cataclysmic drop in immigration for their prophecies to become close to reality.
For more than 20 years, immigrants have been the primary source of population growth in B.C. According to BC Stats, more than a million people from abroad have come to B.C. since 1991 compared with fewer than 230,000 migrants from other provinces.
Wherever they have come from, these new British Columbians have needed homes – more than 634,000 of them since 1991.
Over the past two decades, new housing starts have generally been in line with estimates in the number of new homes needed. Only in the early part of the millennium did housing starts balloon above new household formation levels as housing demand rose with a booming economy. That appeared to lead to a doubling and even tripling of Lower Mainland housing prices across the board.
For housing prices to drop, however, demand would have to plummet well below what’s currently being made available on the market. Several factors could cause that: another exodus of B.C. residents to other provinces, increasing unemployment, unprecedented rise in foreclosures or a widespread slump in the economy. All of those things would drive immigrants away from Canada’s Pacific Gateway.
So far, neither the big banks nor the Canada Mortgage and Housing Corp. (CMHC) are forecasting such a gloomy picture for B.C. Over the past few weeks, economists have consistently told Business in Vancouver that while a correction is in the cards for the real estate market, it will be slight and relatively short-lived.
BMO’s Sherry Cooper is forecasting a 3% slide in housing prices this year; and Scotiabank’s Warren Jestin expected any market cooling off to last no more than 18 months. Carol Frketich, CMHC’s regional economist, told BIV that the decline is likely to be in the 2% to 2.5% range this year, followed by a 3.5% to 4% increase in 2013.
Frketich said the declines will primarily be from a cooling in the single-family housing market, with townhome and condominium prices remaining stable.
“We watch all the indicators in the housing market,” she said, “and what all the indicators tell you is that [the market] is in line with history and with fundamentals.” •
