The BC Housing Market Report, according to CMHC

BC Market Snapshot

Drawing from the most recent insights provided by the Canada Mortgage and Housing Corporation (CMHC), the housing market in British Columbia (BC) has seen significant changes over the past few years, which should transfer into 2024. Here's a snapshot of the current state of the market, supported by data from the Housing Market Outlook:

• Migration Patterns: British Columbia (BC) remains a popular destination for international migrants. In 2022, BC saw a consistent flow of international migrants, with a significant contribution to the province's population growth. Specifically, BC welcomed a total of 103,674 new residents from net international migration, accounting for a staggering 88.7% of the province's population growth. On the other hand, interprovincial migration in BC showed signs of stabilization. While exact numbers for the entire year are not immediately available, the trend suggests a balance between those moving into and out of the province. This balance might be attributed to BC's appealing living conditions, opportunities, and a strengthening job market. In fact, the unemployment rate in BC showed a positive trajectory, declining from 4.90% at the beginning of 2022 to 4.70% by the year's end.
• Resale Market: The average home price in BC's housing market witnessed a minor 1% monthly decrease, settling at an average of $958,424 for August 2023. This represents a 5% increase year-over-year. Despite recent rate hikes by the Bank of Canada in June and July 2023, BC's housing market remains resilient, with a total of 6,608 home sales in August 2023, marking a 16% increase year-over-year.
• Affordability:While there's no direct data for the entire province of BC, taking the Vancouver housing market as a representative example provides insights into the broader affordability trends in the region. In 2022, the budget considered affordable for housing in Vancouver experienced a decline. Starting the year with an affordable budget of $682,831 in the first quarter, it decreased to $617,605 in the second quarter, further dropping to $565,360 in the third quarter, and settling at $555,185 by the end of the fourth quarter. This downward trend highlights the escalating challenges that potential homeowners are facing in the region's real estate market. The data suggests that while the MLS® average sale price fluctuated throughout the year, the affordable budget consistently decreased, emphasizing the widening gap between housing prices and what families can afford.
• New Home Market: While housing starts across Canada dipped from 2021 to 2022, BC's forecasted rise to 223,783 in 2023 indicates optimism in the local construction sector, suggesting a proactive response to housing demand.
• Economic Overview: BC's economy mirrors Canada's broader trends. The nation's real GDP index grew from 2021 to 2022, but a slight anticipated decline in 2023 suggests a need for cautious optimism. This caution is balanced by BC's positive employment trajectory, moving from 99.4 in 2021 to 103.1 in 2022.

In conclusion, the BC housing market has seen fluctuations in terms of prices, migration, and economic indicators. While there have been challenges, the data suggests a potential for growth and stability in the coming years. As always, it's essential to stay informed and make decisions based on comprehensive research and analysis.

Key Market Drivers in British Columbia

British Columbia's (BC) housing market is influenced by many factors. For those keen on navigating the real estate waters of BC, understanding these drivers is paramount. Here's a deep dive into the primary elements shaping the BC housing landscape, drawing insights from the Housing Market Outlook for Spring 2023 and other relevant sources:

• Economic Uncertainty: The prevailing economic ambiguity shadows the housing market's future. Persistent inflation could mean prolonged higher interest rates, potentially stalling the anticipated recovery in housing demand. In such a scenario, housing starts might fail to meet the projected figures, emphasizing the importance of staying informed and adaptable.
• Shortages in Construction Materials and Labour: Local developers are sounding the alarm on the scarcity of construction materials and skilled labour. Such deficits could curtail housing starts, underscoring the need for strategic planning and resource allocation in the construction sector.
• Rental Market Dynamics: The diminishing vacancy rates, coupled with the steady climb in rents, underscores BC's burgeoning rental demand. As more people seek rental accommodations, landlords and property managers might find themselves in a favourable position.
• Economic Overview: Key economic indicators, such as the Real GDP and employment indices, offer a lens into the economic health of the housing market. The uptick in the fixed 5-year mortgage rate from 2020 to 2022 hints at the evolving lending landscape and its potential impact on homebuyers' decisions.
• Affordability Concerns: The average home price in BC was about $1.036 million in 2021, a significant increase from previous years. This price surge, juxtaposed with the consistent rise in demand, suggests that many potential homeowners might find BC's housing market increasingly out of reach.

Regional Deep Dive: British Columbia

British Columbia, with its majestic landscapes and vibrant cities, offers a diverse housing market. Each region within BC has its unique characteristics, influenced by various economic, social, and environmental factors. Let's delve deeper into some of the key regions of BC's housing market, focusing on Vancouver, Victoria, and Kelowna.

Vancouver:

Average Sale Price Trend

• Vancouver's housing market, renowned for its high real estate prices, has seen a consistent upward trajectory in its average sale prices. In 2020, the MLS® average sale price was $1,012,280, which rose to $1,155,631 in 2021. By 2022, the average sale price will have increased to $1,227,245. This upward trend indicates the city's robust housing market, with properties in specific neighbourhoods fetching premium prices due to their proximity to amenities and the downtown core.

Affordability Concerns

• While Vancouver's real estate is known for its premium pricing, the city has witnessed a widening gap between the average sale prices and what potential homeowners can afford. For instance, in 2022, while the MLS® average sale price was $1,227,245, many potential buyers faced challenges in bridging the affordability gap, especially with the rise in mortgage rates and the need for larger down payments.

Market Insights

• Various factors influence Vancouver's housing market dynamics. The city's relatively young population, combined with a significant influx of young international migrants, points to a potential increase in homebuyers in the coming years. However, the affordability challenges, especially with higher mortgage rates and the need for larger down payments, might keep many from purchasing. With net population growth exceeding 80,000 people in 2022 and only 4,000 units of net purpose-built rental creation, there's a clear supply-demand imbalance. This is expected to lead to a significant increase in average 2-bedroom rents over the forecast horizon.

Victoria:

Average Sale Price Trend

• Victoria's housing market has seen a notable increase in average sale prices over the past few years. In 2020, the MLS® average sale price was $777,993, which rose to $906,404 in 2021. By 2022, this figure had further increased to $1,012,428. Despite this upward trend, the market is expected to undergo a mild correction in 2023 due to elevated borrowing costs and deteriorating affordability. However, the medium-term outlook remains positive, with strong population growth and a slowdown in new construction in an already supply-deficient market likely to drive a rebound after 2023.

Affordability Concerns

• The rise in mortgage rates has doubled in two years, making homeownership more challenging for many potential buyers. This has led to a slowdown in buyer demand, with new listings retreating below the 10-year average level. Despite the high demand from outside Victoria, which accounts for almost 30% of homebuyers, many potential buyers will find it challenging to bridge the affordability gap, especially with the expected price rebound in 2024.

Market Insights

• The rental market in Victoria is expected to tighten further in the coming years. Despite the record number of units currently under construction, rental supply is expected to lag behind rental demand, keeping vacancies low. In 2022, the average rent for a two-bedroom apartment was $1,699, which is projected to rise to $1,850 in 2023.

Future Predictions and Market Expectations

British Columbia's housing market has always been a topic of interest for investors, homeowners, and potential buyers. As we move forward, several factors will shape the market's trajectory. Here's what we can anticipate for the future of BC's housing market:

Price Trends and Affordability

BC's housing market, especially in regions like Vancouver and Victoria, has seen significant price escalations over the past few years. While some areas experienced a peak in prices in 2022, the overall trend indicates a continued rise in property values. However, with these rising prices, affordability remains a concern. Elevated borrowing costs and the widening gap between average wages and property prices might deter potential buyers, especially in prime locations.

Demand and Supply Dynamics

The demand for homes in BC remains robust, driven by factors such as immigration, interprovincial migration, and the appeal of the province's cities. However, supply, especially in the new construction segment, might see a slowdown. Elevated construction costs, labor shortages, and financing challenges could lead to fewer housing starts in the coming years. This imbalance between demand and supply is expected to keep prices elevated.

Rental Market Projections

With the challenges in the ownership market, the rental segment in BC is poised for growth. Cities like Vancouver and Victoria are likely to see a surge in rental demand, especially from millennials and international migrants. However, the supply side might struggle to keep up, leading to lower vacancy rates and higher rents.

Economic Influences

The broader economic landscape, including factors like interest rates, inflation, and GDP growth, will be crucial in shaping BC's housing market. Persistent inflation and higher interest rates could dampen buyer enthusiasm, while a robust economic recovery could boost market confidence.

Regional Variations

It's essential to note that BC's housing market isn't monolithic. Regions like Vancouver, Victoria, each have their unique market dynamics, influenced by local economic conditions, migration patterns, and housing policies. For instance, while Vancouver might see a slowdown in single-detached home sales, Kelowna's appeal as a recreational hub could drive demand in that region.

Navigating BC's Housing Future with Pine

The British Columbia housing market is a tapestry of evolving trends, opportunities, and challenges. As prices fluctuate and demand patterns shift, potential homeowners and investors might find the landscape complex. However, amidst these changes, one constant remains: the need for trusted guidance. This is where Pine, your direct mortgage partner, steps in. With our deep market insights and tailored mortgage solutions, we aim to demystify BC's housing intricacies. 

Whether you're looking to buy your first home, invest in a promising property, or refinance an existing mortgage, Pine is committed to making your journey smooth and informed. As the market continues to evolve, let Pine be your compass, guiding you towards informed and confident housing decisions in British Columbia.