‘Mild’ housing recession forecast for B.C. through 2021
Cheryl Chan
The Province
B.C. is in a “mild” housing market recession, with the Lower Mainland shifting from a seller’s market to a “mild” buyer’s market, according to a new housing forecast report.
A recession is usually used to describe a period of significant decline in the economy, but that term also applies to a B.C. housing market marked by a sharp decline in home sales, eroding prices, and a slowdown in housing starts, said Bryan Yu, deputy chief economist of Central 1 Credit Union, which released its B.C. housing forecast for 2018 to 2021 on Tuesday.
“When we look at it through these lens, it’s the first time we’ve seen these slowdowns, a cycle where there’s a decline in the number of transactions, erosion of home prices … and new home construction activity seeing a contraction,” said Yu.
Resales of residential properties dropped 17 per cent from 2017 to 2018, said the report, while housing starts slowed by 10 per cent, with another 18 per cent drop forecast for 2019.
Aggregate sales in the province’s urban centres — the Vancouver, Kelowna, Victoria and Abbotsford-Mission CMAs — fell 40 per cent from the end of 2017, but even medium and small markets were hit with a 10 to 20 per cent reduction in activity.
“When you add all these factors together, from a buyer’s standpoint, you have less access to credit and less confidence in the market as well,” said Yu, who expects these factors to be reflected in prices in the coming year.
While median resale prices recorded a six per cent increase in 2018 compared to the previous year, it’ll dip a modest two per cent in 2019 to $520,000, said the report.
The trend will be more pronounced in the Lower Mainland/southwest region of B.C., where prices are expected to drop 3.6 per cent next year to $651,000.
But because the downturn is driven by policy measures such as the federal government’s mortgage stress test, the province’s introduction of the speculation tax and school tax, and Vancouver’s empty homes tax, and not by a broader economic slump, economists don’t see a major crash in housing prices.
There’s room for buyers to negotiate, but on the flip side, “the economy is strong enough that there aren’t that many sellers who have to bring down their price,” said Yu. “For most sellers, they don’t have to sell … It puts a cushion under the market.”
The report also examined B.C.’s rental housing market.
It said “renters will continue to experience stressful conditions,” with the province’s low rental vacancy rate of 1.4 per cent expected to hold steady through 2021 as renters struggle to shift into home ownership given tighter mortgage qualification requirements and continuing strong demand.
“Options are very limited,” said Yu. “There’s not a lot of supply out there.”
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