An increase in growth in China’s gross domestic product (GDP) would have a positive impact on the housing market in Vancouver, argues a Conference Board of Canada report released March 24.
The influence of China’s economic state on the city’s housing market should not be underestimated; the report argues that the Chinese economy is one of the biggest drivers behind housing sales activity in the area. It “rivals” not only the city’s population growth but also the employment environment and mortgage interest rates in terms of what determines the state of the market.
“The chief implication is that observers need to pay attention to China’s economic health when assessing the outlook for Vancouver’s housing market,” the report said.
“This analysis suggests that Vancouver’s housing markets would perhaps welcome a pickup in Chinese GDP growth more than a rise in local employment and about the same as lower Canadian interest rates.
“If the Chinese economy is indeed improving, this could help rekindle both new and resale demand in the Lower Mainland.”
The report argues that when looking back over the past couple decades, periods of high and low sales in Vancouver home sales can be correlated to similar trends in China’s economy. For example:
- in the 1990s, China’s GDP growth was “tepid” with annual growth rates ranging from 3.8% to 7.8%, after annual expansion of 12% per year in the 1980s. Correspondingly, Vancouver’s housing market was also relatively sluggish, despite the fact that the local economy was healthy, with increasing employment of 2.3% annually and an annual population growth of 2.5%; and
- in the 2000s, Chinese GDP grew by over 8% annually – and Vancouver’s housing market also took a dramatic swing upward.
Today, the pattern is repeating, the report said. Vancouver’s employment growth was 2.1% per year on average between 2010 and 2012, and population grew by 1.6%. Those factors, combined with low mortgage rates, would lead to the expectation of a more active housing market.
However, over the same period, China’s GDP growth slowed down to 12-year lows – and Vancouver home resale volumes fell 23% in 2012, while the average home sale price dropped 6.4%.
@EmmaHampelBIV
