The housing market in British Columbia will post stronger sales and increasing prices over the next few years, according to Central 1 Credit Union’s B.C. Housing Forecast, released July 3, and this will be driven in large part by the Lower Mainland.
An improving labour market and a dip in mortgage rates will lead a rebound from the weak climate seen in 2013, and the median home price across all housing types is expected to hit $595,000 by 2017.
“While sales remain below mid-2000s highs, forecasted activity will be the highest since 2009,” the forecast states. “With market conditions in the Greater Vancouver in balance, higher sales drive stronger than previously anticipated price growth.”
Sales of detached homes have remained strong, with the median price surpassing $820,000 in 2014’s first quarter. This represents a 15% growth year-over-year.
Growth, in part led by immigration, will increase over the next few years.
Increases are also expected across the province.
“Price growth is expected to average less than three per cent a year through to 2017 as higher borrowing costs and stricter mortgage insurance policies weigh on affordability,” said forecast author and Central 1 economist Bryan Yu.
“The strongest gains in B.C. will be in the Lower Mainland and Northern B.C. regions. Excess supply and subdued demand hold back price growth in the interior and island markets.”
These increases will be in spite of anticipated higher borrowing costs, and will only be “a modest source of growth for the provincial economy.” Central 1 forecasts that average mortgage rates will reach about 5.5% by the end of 2015 and up to 5.75% by 2017.
These rising interest rates, coupled with mortgage-tightening policies, will price some first-home buyers out of the market. This will lead to increased rental demand, but Central 1 said this will likely not have a significant impact on rental-market construction.
Median home prices across the province are expected to reach $429,000 by 2017.
The provincial economy is set to expand 2.5% in 2014 and by more than 3.5% for each of the next few years after that. This will increase consumer confidence as well as drive employment and boost income levels.
Central 1 forecasts decreasing numbers of B.C. residents leaving the province for Alberta and Saskatchewan by 2015.
Some of the strongest gains over the next few years will be seen in Northern B.C., driven by port activity and LNG projects.
