B.C. housing forecast 2014-2017

Economic Analysis of British Columbia
Volume 34 • Issue 2 • July 2014 | ISSN: 0834-3980
B.C. Housing Forecast 2014 - 2017
Resale Market Forecast, B.C.
Units (000s)
Dollars (000s)
120
Highlights:
•
•
•
FORECAST
100
400
80
Improvements in broader economic growth,
employment, and recreational demand to lift
housing market despite rising interest rates
500
300
60
200
40
100
20
Existing home sales to rise more than ten per
cent this year following weak 2013
0
0
1990
Median provincial price to reach $396,000
this year on Lower Mainland gains, and
forecast to reach $429,000 by 2017
1994
1998
2002
Transactions (L)
2006
2010
2014
Median Price (R)
Source: Landcor Data Corp. and Central 1 Credit Union
•
Lower Mainland and northern B.C. housing
markets relatively stronger performers over
forecast period
year through 2017 to $429,000. However, regional
performance will vary with the strongest gains in the
Lower Mainland and northern B.C. markets.
•
Housing starts to trend modestly to near
30,000 units by 2016 higher but remain
below household formation
Interior markets and island markets, which are still
recovering from the recessionary decline in housing
demand and excess supply, record relatively weaker
pricing conditions. Builders are slowly expected
to ramp up new home construction, but remain
cautious due to tempered command conditions
and elevated new home inventories in a number of
markets.
British Columbia’s housing market is expected to
post stronger sales and rising prices over the next
few years but remain only a modest source of growth
for the provincial economy. Growth in the broader
economy and labour market, a turnaround in recreational housing demand and population gains underpin housing stronger housing demand, but gains are
partially offset by higher borrowing costs and the
tighter mortgage insurance policies implemented in
recent years.
Resale housing transactions are forecast to shift
higher after a disappointing few years of activity but
remain subdued relative to the size of the population
base. Growth in the median price is forecast to average slightly less than three per cent per year through
Housing market performance depends on various
contributing factors, including economic conditions,
population growth and demographics, income
growth and financing conditions. Each of these drivers will exert positive and negative forces on sales in
the next three years.
In past cycles, the housing sector has led economic
growth, but the prolonged period of ultra-low interest rates since the recession points to a housing
market performance that lags broader economic and
employment growth. Following modest expansion in
line with the national economy of about two per cent
Housing Forecast - Table 1
Residential Resale Transactions, Units
% change
Residential Resale Median Transaction Price
% change
Housing Starts
% change
2012
2013
2014
2015
2016
2017
63,798
66,250
75,075
79,150
84,075
88,195
-11.1
4.4
13.3
5.4
6.2
4.9
382,000
384,000
396,000
406,000
418,000
429,000
-4.5
0.8
3.1
2.5
3.0
2.6
27,465
27,054
27,200
28,300
29,300
31,000
4.0
-1.5
0.5
4.0
3.5
5.8
Source: Landcor Data Corp, Canada Mortgage and Housing Corporation, Central 1 Credit Union Forecast
1
Central 1 Credit Union
in 2013, B.C.’s economy is forecast to expand by less
than 2.5 per cent this year. The provincial economy is
still in a relatively low-growth state but is expected to
improve significantly over the next few years gearing
off an export-led economy and a ramp up of major
project construction.
Growth will lift housing momentum, but short-tomedium demand will be tempered by the weaker
growth and stagnant job market of recent years.
Provincial economic growth is forecast to average
more than 3.5 per cent from 2015 to17. Hiring
growth shifts to near two per cent by 2016, which
underpins housing demand and population gains.
Regional performances will differ given varied economic structures.
Growth in the population is a key driver for net new
housing demand, but gains are expected to lag the
economy at about one per cent through 2015 before
rising in the latter years. Net migration increases this
year but remains at a subdued pace near 33,000
persons before moving above 40,000 persons by
2016.
The flow of landed immigrants to B.C. has decelerated since 2010, which has likely reflected a combination of weakness in both the local and broader
global economy as fewer skilled-workers and foreigninvestor class of immigrants entered the province.
While the investor stream has since been shut down
by the federal government, international flows are
forecast to shift higher as improving economies drive
higher global mobility.
On the interprovincial front, B.C. has been on the losing end over the past two years with more residents
relocating to other provinces. More specifically, residents have left for “greener” economic pastures of
Alberta and Saskatchewan, outnumbering net gains
from the rest of Canada. Stronger economic activity
in the prairies will continue to draw B.C. residents
this year but the drain will diminish. Strengthening economic growth and more job opportunities
should keep residents within B.C. borders and attract
Canadians from other parts of the country in 2015
onwards.
Although population expansion is low, net household
formation climbs to above 30,000 per year reflecting aging demographics and smaller household
size. Demographic trends suggest population gains
will be led those in the 25 to 34 and 55-plus age
cohorts. The former is a key age group for household
formation as children move out of the family home or
cohabitate, providing demand for both homeowner-
Economic Analysis of British Columbia
Real GDP and Employment Growth
Per Cent
FORECAST
6.0
GDP
Employment
4.0
2.0
0.0
-2.0
-4.0
2008
2010
2012
2014
2016
Source: Statistics Canada and Central 1 Credit Union.
B.C. Population Outlook
Net Migration (000s)
Population Growth (%)
1.6
80
1.4
60
1.2
40
1.0
20
0.8
0
Total
0.6
2006
Int'l
Inter-prov
FORECAST
-20
2009
2012
2015
2006
2009
2012
2015
Source: Landcor, CMHC and C1CU
Mortgage Rate - Posted 5-Year Fixed
Per Cent
9.0
8.0
7.0
6.0
5.0
4.0
2000/01 2002/01 2004/01 2006/01 2008/01 2010/01 2012/01 2014/01
Source: Statistics Canada and C1CU. note: monthly
ship and rental accommodations, while growth in the
latter may provide greater demand for condominium
product.
Rising mortgage rates are expected to lean against
the housing market over the forecast horizon but
will be less of a drag than previously anticipated. The
yield curve has flattened with a weaker Canadian
economic outlook and markets have responded to
expectations of a delayed Bank of Canada rate hike.
2
Central 1 Credit Union
In fact, the housing market has received a boost from
lower borrowing costs this year, which has enhanced
affordability. While the medium-term outlook is
still for rising borrowing costs, mortgage rates
have ratcheted lower. Buyers have seen the posted
five-year rate tumble to a record-low 4.79 per cent,
marking a decline of 45 basis points (bps) from yearend. Note that these are posted rates — contract
rates are much lower, with some lenders offering
five-year rates below three per cent. Mortgage rate
cuts reflect a combination of lower funding costs in
bond markets and a bid to increase market share by
financial institutions in a soft housing market.
MLS® Sales, Monthly
Units
10,000
8,000
6,000
4,000
MLS® Sales
2,000
2007
2008
2009
2010
2011
Rolling 10-year average
2012
2013
2014
Source: CREA, and Central 1 Credit Union
Lower borrowing costs provide uplift to home sales
through the summer as prospective buyers jump
off the fence to take advantage of affordability
improvements. We do not expect these rates to last
beyond the fall. Ultra-low mortgage rates, which
further eased during the first quarter, are expected
to rise over the forecast horizon. The posted five-year
rate is forecast to stay below five per cent through
2014, with a trend to about 5.5 per cent by the end
of 2015. An average of 5.75 per cent is forecast for
2017.
While financing costs will outpace income gains and
have a dampening effect on activity, it will not cause
a market correction. Higher interest rates will reflect
improving economic conditions that drive higher
consumer confidence, incomes and employment.
There are prior instances when housing sales and
prices have risen in the face of higher mortgage rates
when accompanied by a stronger economy.
In addition to a rising rate environment, successive
rounds of mortgage insurance policy tightening in
recent years remain a hurdle for first-time buyers
as well as the move-up segments of the market. A
decline in purchasing power for first-time buyers and
flat condominium prices has lowered mobility in the
entry-level segment of the market, which will remain
a constraint to overall sales activity over the coming
years.
Resale housing market
Existing home sale trends were uneventful in early
2014 as the decelerating pattern going back to
late-2013 persisted. However, mortgage rate cuts
have proven to be a powerful catalyst in arresting the
slide, incenting more buyers to pull the trigger. Sales
through the MLS® system have shifted higher since
the end of the first quarter led by larger urban areas
in the Lower Mainland, Capital and Central Okanagan
regions.
Economic Analysis of British Columbia
Resale Transactions Per Capita
Transactions per 1000 persons
35
30
25
20
15
10
1981
1985
1989
1993
1997
2001
2005
2009
2013
2017
Source: Landcor Data Corp., Statistics Canada and Central 1 Credit Union
While the trend has perked up and year-over-year
gains are strong, absolute sales levels remain a disappointment. Provincial sales held below the 10-year
average — a level already weighed down by five years
of post-recession weakness. Sales have rebounded off
the recent trough but near the lowest levels since the
late 1990s when adjusted for the growing population.
Although record-low mortgage rates will boost activity through the summer months, tempered demand is
expected to persist.
While MLS® data is the most often quoted benchmark and more timely, we forecast existing home
indicators using data provided by Landcor Data
Corporation. Our data set is based on actual arm’slength title transfers in the province, consistent with
standard economic geographies and allows direct
comparisons of median home values and sales by
product type.
Total resale transactions in the province are forecast
to reach about 75,000 units this year led by a gain
in the Greater Vancouver region. While this is a 13
3
Central 1 Credit Union
per cent increase from a year ago, it compares to a
period of exceptionally low sales in both 2012 and
2013 near 65,000 units. From 2000 to 2010, annual
sales averaged above 85,000 units.
Sales growth is recorded across product markets
this year with a stronger annual gain in the detached
housing sector. We expect sales to rise at a pace
of about five per cent per year from 2015 through
2017. Annual gains are significant, but levels remain
subdued in most areas of the province with provincial
sales of about 88,000 by 2017. Home sales will be
constrained by a modest pace of population and
economic growth in the near-term, a rising interest
rate trend and the tighter mortgage insurance rule
environment.
The upshift in sales this year boosts the provincial
median price by about three per cent to $396,000
but is driven mainly by upside pressure in the Greater
Vancouver market, which has seen a significantly
stronger detached housing demand and pricing conditions. Greater Vancouver and the Lower Mainland
as a whole largely dictate median provincial price
patterns given the region’s annual share of provincial
sales fluctuates between 50–60 per cent. Provincial
price growth averages slightly less than three per
cent per year through 2017, which falls short of the
historical long-term average gain of more than five
per cent due to modest demand — growth averaged
more than eight per cent per year in the 2000s.
While the provincial price level is expected to rise
modestly, regional outlooks differ due to varying
economic and housing market conditions.
Strengthening demand and land appreciation to
underpin price growth in Lower Mainland
The Lower Mainland-Southwest, anchored by
Greater Vancouver, provides most of the provincial
sales and price uplift this year. A relatively stronger
labour market performance in recent years and
temporary downshift in mortgage rates fuels a
significant rebound over a weak 2013. In particular,
sales in Greater Vancouver climbed 16 per cent to
nearly 39,000 units. While sales remain below mid2000s highs, forecasted activity will be the highest
since 2009. With market conditions in the Greater
Vancouver in balance, higher sales drive stronger than
previously anticipated price growth.
Detached home activity has been surprisingly resilient
as buyers have taken the region’s high prices in stride.
Sales growth was up sharply early this year, bidding
up the median price level to above $820,000 in the
Economic Analysis of British Columbia
Resale Market Forecast, Lower Mainland
Southwest
Units (000s)
$(000s)
70
600
Sales (L)
60
Median Price (R)
500
50
40
400
30
20
300
10
0
200
2000
2002 2004
2006
2008
2010
2012
2014
2016
Source: Landcor and Central 1 Credit Union
first quarter — a gain of about 15 per cent from
year-ago levels. Shifts in geographic sales composition
and product quality contributed to the price upshift
with stronger sales and price growth concentrated in
Vancouver city, but constant-quality price metrics like
the CREA home price index also point to significant
detached home price growth of around four per cent
from a year ago. The market has proven exceptionally
rewarding to single-detached homeowners in recent
years, with the regional median value climbing from
about $600,000 in 2009.
In contrast, growth in apartment condo and attached
unit values has been more modest. While sales were
also up sharply on a year-over-year basis, gains were
lower and the trend eased into early 2014 before
turning recently higher. Prices have followed suit,
trending range-bound in recent years.
Diverging single- and multi-family home prices reflect
both short- and long-term factors. Rising detached
home prices reflects a scarcity of developable land in
Greater Vancouver as the geographically constrained
land base remains under pressure from a rising
population. Meanwhile, the financial consideration of
detached homes with income-generating suites has
also contributed to gains. In contrast, price growth in
the multi-family market has been quelled by tighter
housing finance policies and some excess building in
recent years. Mortgage insurance and policy tightening in recent years has curtailed purchases by lowerequity entry-level buyers, leading to a short-term
dampening of condo markets in high-priced regions
like Greater Vancouver.
Home sales and prices are forecast to rise over
the next few years as demand is lifted by positive
economic growth and immigration, while land
appreciation continues. Economic growth is being lifted by substantial commercial construction,
4
Central 1 Credit Union
including transportation infrastructure and office
towers, while a number of major tech companies are
expanding or settling in the area. Mortgage rates are
a drag, but will not offset gains. Greater Vancouver
home values are forecast to rise by more than three
per cent per year over the forecast period to about
$595,000 by 2017, led by stronger detached market
growth of about four per cent. Multi-family sales will
rise at a stronger pace than detached given lower
price points, but price growth will be more modest at
about two to three per cent per year.
Price growth patterns point to a widening gap
between housing ladder rungs. Detached home
prices will continue to be bid up over the long term
as underlying land values appreciates — a predictable
outcome of rising population and a limited land base.
Developers will continue to package and convert
existing residential and commercial lots to construct
higher-density product, bidding land and home prices
higher. While there is no stopping upward pressure
on detached and duplex prices, condo apartments
grow at a slower pace as municipalities increase
density allotments and builder intensify use of the
land base through taller and larger structures with a
deeper breadth of options for family housing.
Sales growth in the Fraser Valley will be comparable,
if not stronger over the forecast period but is rebounding off a low base. Sales were half of mid-2000
highs in 2013, reflecting a stagnant population and
generally subdued labour market. Home values in the
region, which is anchored by Abbotsford-Mission and
Chilliwack, are forecast to rise at a pace of about one
per cent per year over the period.
Parts of the Fraser Valley have increasingly become
bedroom communities for the Greater Vancouver
area given the attractiveness of lower home prices,
particularly for those commuting to Surrey and Langley. This trend decelerated with the broader population and economic slowdown and stability in Greater
Vancouver pricing. Population growth was low at 0.6
per cent in 2013, compared to an average gain of
about 1.5 per cent over the past decade. Regional
employment growth has been positive over the past
year, but unemployment rates in both Chilliwack and
Abbotsford remain elevated.
Interior and Vancouver Island prices to remain
stagnant
Regions hard hit by the recession downturn in discretionary spending are expected to record a substantial
pickup in sales over the forecast period, but given a
low base, levels will remain relatively weak. Regions
Economic Analysis of British Columbia
Greater Vancouver Resale Price by Product
$ (000s)
Detached - Apartment Price Differential $(000s)
1,000
600
800
500
600
400
400
300
200
Detached
Apartment
Attached
0
2005 2008 2011 2014 2017
200
2005
2009
2013
2017
Source: CMHC and Central 1 Credit Union.
Units (000s)
Resale Market Forecast,
Thompson-Okanagan
$(000s)
20
350
Sales (L)
Median Price (R)
300
15
250
10
200
5
150
0
100
2000
2002 2004
2006
2008
2010
2012
2014
2016
Source: Landcor and Central 1 Credit Union
catering to more recreational and retiree demand,
including the southern interior and Vancouver Island,
are expected to benefit from a positive economic
growth cycle and a lower Canadian dollar. The former
will help drive discretionary demand for vacation
property and incent older individuals to revisit
retirement plans. Meanwhile, the low Canadian dollar
provides a disincentive to purchase U.S. recreational
property, particularly given strengthening prices
south of the border. Declining new home inventory
will also navigate buyers to what is still an overstocked existing housing market.
The Thompson-Okanagan housing market continues
to improve after the recessionary tumble, but subregional trends are mixed. The region, which spans
from Kamloops-centred Thompson-Nicola through
the Okanagan region anchored by Kelowna, Vernon
and Penticton, is expected to post a third consecutive
sales increase this year, reaching 10,000 units and
about 9.5 per cent above 2013, but remain at about
two-thirds of mid-decade levels. Sales growth is led
by Kelowna-anchored Central Okanagan, which has
likely seen a boost in local demand from interest rate
5
Central 1 Credit Union
cuts. Median price levels are forecast to hold steady
at $314,000.
While labour market conditions in the region have
improved over the past year, demand remains
constrained by recession-induced population contractions outside the Central Okanagan. A recovery
in tourism and recreational property markets —
previously propped up by from Alberta and Greater
Vancouver buyers — has proven elusive, although
conditions for a pickup in discretionary activity have
improved.
Further recovery in the housing market is expected.
Sales growth in the Thompson-Okanagan is forecast
to average more than 7.5 per cent per year from
2015 to 2016, pushing total sales to near 12,000
units. Inventory drawdown will continue, providing
less competition for the existing home market, but
median price growth will be held back by persistence
of oversupply, particularly in the southern Okanagan
and Thompson-Nicola regions. While excess inventory
abates, the median value is expected to grow by an
average of only 1.5 per cent per year through 2017
following an extended period of stagnation since
2008.
Similar patterns are expected in the Kootenay,
which also experienced easing population in recent
years and a dearth in recreational housing demand
compared to the pre-recession era. Home sales
have rebounded since an early-2013 pullback and
annual levels are forecast to jump nearly 10 per cent
but remain at about half of mid-2000 levels. Sales
continue to trend higher to about 3,100 units by
2017. The median home value, which has stagnated
since 2008, will vary little over the coming period.
Regional housing oversupply, a trait shared with other
markets oriented towards recreational demand, will
weigh on prices this year before mild gains take root
in 2015 onwards. Price levels will remain range-bound
through the forecast period near $235,000, pointing
to nearly a decade of stagnant values.
Shifting westward and over the Salish Sea, home
sales on Vancouver Island are expected to rise for a
second consecutive year following five consecutive
annual declines, but low demand and soft market
conditions and supply excesses contribute to a flat
price profile. Home sales are forecast to rise about
7.5 per cent this year, with price levels down about
one per cent. Sales growth will be concentrated in
the larger urban areas of Victoria and Nanaimo, with
weaker performances elsewhere in the region.
Economic Analysis of British Columbia
Resale Market Forecast, Kootenay
Units
$(000s)
6,000
250
Sales (L)
Median Price (R)
5,000
200
4,000
3,000
150
2,000
100
1,000
0
50
2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: Landcor and Central 1 Credit Union
Resale Market Forecast, Vancouver
Island/Coast
$(000s)
Units (000s)
400
25
Sales (L)
Median Price (R)
350
20
300
15
250
10
200
5
150
0
100
2000
2002 2004
2006
2008
2010
2012
2014
2016
Source: Landcor and Central 1 Credit Union
Housing markets on the Island continue to face
varying challenges. Labour market conditions have
weakened this year with an employment downswing
erasing the modest gains observed in recent years. A
combination of low population growth in the Capital
(Victoria) and Nanaimo areas and declines elsewhere
on the Island, weak recreation and retiree demand
and government budget restraints continued to
weigh. A gradual recovery in discretionary purchases
in recreational property and pickup in retiree demand
will provide uplift over the forecast period.
Annual growth in Vancouver Island sales is predicted
to remain solid over the forecast period and trend to
about 14,700 units by 2017. This will mark a modest
performance, but below the range of 18,000 to
20,000 units observed from 2005 through 2007.
The median home value for the region is forecast to
remain range-bound through 2016 near $335,000.
Excess inventory of both new and existing units,
fuelled by overbuilding prior to the recession, will
temper price growth despite rising sales. However,
oversupply weighs less on prices going forward.
Median price growth in the Capital region is expected
to outpace the island slightly as a whole.
6
Central 1 Credit Union
Resale Market Forecast, North Coast
Resale Market Forecast, Nechako
Units
Units
$(000s)
1,500
220
800
200
700
Sales (L)
Median Price (R)
1,250
180
1,000
160
$(000s)
220
Sales (L)
Median Price (R)
600
200
180
500
160
400
750
140
500
120
250
100
0
80
1995 2001 2003 2005 2007 2009 2011 2013 2015 2017
Source: Landcor and Central 1 Credit Union
140
300
120
200
100
100
0
80
2000 2002 2004 2006 2008 2010
2012
2014
2016
Source: Landcor and Central 1 Credit Union
Northern B.C. housing markets to outperform rest of
province
Resale Market Forecast, Cariboo
Units
$(000s)
Housing markets in B.C.’s northern regions are
expected to outperform the provincial trend over
the forecast period. Despite weakness in the mining
development and activity due to a down-cycle in related commodity prices, the regional housing market,
which spans the North Coast and Nechako, Cariboo
and Northeast regions, will benefit from a positive
investment cycle related to major project commencements. Although the path, timing and degree
to which the north prospers remains uncertain, an
upshift in economic conditions and expected investments in LNG terminals and pipelines, port expansion,
the oil and gas fields and positive momentum for
forestry provides the conditions for strengthening
home sales and further price appreciation.
economy is mixed. Mining is under strain with two
projects recently put on hold, but the Burns Lake
sawmill reconstruction is underway.
While the north is often referred to in a single breath,
there have been clear differences among regional
markets performances in recent years. On one end,
the North Coast, which is anchored by Prince Rupert,
Kitimat and Terrace, has observed booming growth
in home sales and price levels. The region has benefitted from stronger port activity, pre-construction
activity related to LNG and the Rio Tinto Alcan
modernization project. Sales have recovered from
a post-recession lull, rising 20 per cent last year to
about 1,050 units and a third successive year in which
sales have risen by 20 per cent or more. Price levels
have similarly followed suit, surging more than 21
per cent last year to $185,000. The median price has
climbed more than 35 per cent since 2009.
Strong pricing conditions in both areas, and a pickup
in North Coast sales, is curiously at odds with weak
local employment and population growth trends.
However, this may reflect a significant mobile or temporary workforce which, at least in Terrace and Prince
Rupert (where data is available), has lowered vacancy
rates and sharply boosted rents, driving values — but
not necessarily sales — higher. In addition, the region
may be seeing increased investor interest due to
potential economic growth in the region. Sales and
prices levels are forecast to rise in the Nechako and
remain elevated in the North Coast. New projects
and associated economic growth will drive in new
residents into the region, boosting demand for existing and new home construction.
In the Nechako, which counts Fort St. James, Smithers and Vanderhoof as its key municipalities, sales
remain stunted near post-recession lows, but pricing
has continued to scale new heights, reaching a
median value of $195,000 last year. The regional
The Cariboo housing market has been comparatively
weaker than the rest of the northern region. The
region, anchored by Prince George and municipalities
including such as Quesnel, Mackenzie and Williams
Lake, has been slow to recover following the forestry
Economic Analysis of British Columbia
5,000
220
Sales (L)
Median Price (R)
4,000
200
180
3,000
160
2,000
140
120
1,000
100
0
80
2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: Landcor and Central 1 Credit Union
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Central 1 Credit Union
sector downturn over the past decade, which has
coincided with a halving of sales from mid-decade
levels. A positive outlook for wood product demand
will be partially negated by the long-term impacts of
the mountain pine beetle epidemic on the regional
supply. Nonetheless, we expect to see modest sales
and price gains in the Cariboo, reflecting the growing
importance of the Prince George area as a northern
gateway and hub, which will keep resale transactions
on an up-trend. Sales in the Cariboo are forecast to
rise three per cent this year before averaging about
nine per cent each year from 2015 to 2017, but sales
levels will remain subdued. Median price levels rise
one per cent this year and about two per cent per
year thereafter.
Northeast B.C., which includes Fort St. John, Dawson
Creek and their surrounding areas, has experienced
modest sales volumes but persistent price appreciation in recent years. While resale market trends have
been similar to the Nechako, local demand has been
robust with population levels rising across the Northeast as households have been drawn to the region’s
strong energy economy despite some weakness in
the met coal mining sector. Resale transactions are
still well below mid-2000 peaks but demand has
seemingly shifted directly into the new home market
with housing starts and building permits trending
near the highest level in more than two decades.
Elevated demand has continued fuel upside pressure
on prices, which rose another seven per cent in 2013.
Since 2009, the median value is up nearly 30 per
cent. Regional housing is expected to remain robust
with LNG projects in the northwest driving more
demand for drilling in the Northeast, boosting labour
demand and incomes. Price levels are forecast to
trend to more than $320,000 by 2017, marking a 16
per cent gain from 2013.
New Home Construction
Resale Market Forecast, Northeast
Units
$(000s)
2,000
350
Sales (L)
Median Price (R)
300
1,500
250
200
1,000
150
100
500
50
0
0
2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: Landcor and Central 1 Credit Union
Housing Starts, B.C.
Dwellings (000s)
FORECAST
45
40
35
30
25
20
15
10
2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: CMHC and Central 1 Credit Union.
Complete and Unoccupied Units, B.C.
Dwellings (000s)
5
4
3
2
1
B.C. housing starts are forecast to hold level this
year despite positive resale market momentum and
strong early-year growth in new home construction.
Year-over-year growth in housing starts has thus far
been phenomenal with urban markets posting a 14
per cent year-to-date gain through May, led by higher
detached home activity. However, builders will be
hard-pressed to maintain this pace given that growth
reflects a low base in early-2013 and the trend has
shown signs of deceleration. Builders remain cautious amidst modest demand and elevated levels of
new and existing home inventories. A recent slide in
building permit volume, which fell to a two-year low
in April, points to a further slowing in starts.
Economic Analysis of British Columbia
0
2000
2002
2004
2006
2008
Source: CMHC and Central 1 Credit Union.
2010
2012
2014
note: large urban markets
Annual housing starts are forecast to hold steady
at about 27,200 units with a moderate pull-back
in the Lower Mainland and declines in Vancouver
Island markets. The island, as well as the central and
southern interior regions, will continue to build at a
low pace, although Thompson-Okanagan starts are
expected to rise this year on higher Kelowna demand
and declining inventory.
8
Central 1 Credit Union
Housing Starts by Product, B.C.
Rental Housing Starts, Annual
Units
Dwellings (000s)
FORECAST
30
Per Cent
5,000
30%
Rental Starts (L)
Detached
Multi-family
Share of Total Starts (R)
25%
4,000
25
20%
3,000
20
15%
15
2,000
10
1,000
10%
5
5%
0
2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: CMHC and Central 1 Credit Union.
Starts are forecast to trend higher over the forecast
horizon due to economic and demographic factors
but below household formation levels as high, albeit
declining, inventory and rising interest rates hold
back activity. Regions outside the Lower MainlandSouthwest are expected to show a stronger pickup in
new construction as they rebound off exceptionally
weak post-recession levels contributing to relatively
stronger growth in detached housing starts. Provincial starts are forecast to trend to a pace of about
30,000 units by 2016 but remain well below cycle
highs observed in 2007. Household formation is
forecast to average about 31,000 from 2014 to 2017.
A period of soft new home construction means
the residential sector will be a damper on the
economy this year. Total residential investment is
forecast to grow by two per cent this year, despite
slightly stronger activity related to renovations and
acquisition-related costs. Next year’s bump in housing
starts will drive higher investment spending before
moving back to an annual growth rate of above three
per cent through 2017.
Rental Market
Rental market conditions vary significantly across the
province with larger urban markets such as Metro
Vancouver, Victoria and Kelowna typically exhibiting
lower vacancy rates and higher rents, reflecting
higher population growth and diversified economies.
Areas with project or resource-related booms, including the North Coast and the Northeast have recorded
low vacancies, although, conditions can fluctuate
significantly. In contrast, areas with stronger dependence on industries like tourism and forestry exhibit
higher vacancy rates.
0%
2000
2002
2004
Source: CMHC and C1CU.
2006
2008
2010
2012
latest: 2013
Nonetheless, the spring report points to a tightening of rental conditions relative to a year ago with
significant vacancy rate declines in the province’s
large urban areas, as well as in northern B.C. and
some recreational markets. Lower vacancy rates
reflect population gains and region-specific economic
growth while tighter mortgage insurance rules
and a tempered labour market have also delayed
homeownership for some low-equity buyers. While
conditions have led to resurgence in rental market
construction in recent years — more than 10 per cent
of urban housing starts were rental product over the
past three years, compared to less than five per cent
from 2005 to 2010 — the gains generally kept pace
with demand.
The provincial vacancy rate for purpose-built apartment and townhomes is forecast to hold rangebound over the forecast horizon, easing to 2.3 per
cent this year from 2.5 per cent in 2013, and hold
above two per cent through 2017. While sales pick
up, rental demand will remain strong due to affordability constraints to homeownership for first-time
buyers.
Bryan Yu
Economist, Central 1 Credit Union
[email protected]
www.central1.com
604.742.5346
Rental market data is less timely than new home
construction and resale market data with estimates
generated by CMHC compiled only twice a year.
Economic Analysis of British Columbia
9
Central 1 Credit Union
Appendix
Housing Forecast - table 2 . . . . . . . . . . . . . . . . . .10
Real Residential Investment . . . . . . . . . . . . . . . . . 11
Annual Residential Resales . . . . . . . . . . . . . . . . . . 12
Median Annual Residential Price . . . . . . . . . . . . . 13
Total Housing Starts . . . . . . . . . . . . . . . . . . . . . . .14
Greater Vancouver Resales . . . . . . . . . . . . . . . . . .14
Forecast Summary . . . . . . . . . . . . . . . . . . . . . . . . .15
Population Components . . . . . . . . . . . . . . . . . . . .15
Mortgage Rates . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Housing Forecast - table 2
Resale Market
Transactions
All Units
% change
Detached
% change
Condo Apartment
Resale Median Price
2015
2016
2017
63,798
66,250
75,075
79,150
84,075
88,195
-11.1
4.4
13.3
5.4
6.2
4.9
34,568
35,725
41,000
42,500
44,000
45,600
-9.9
4.2
14.8
3.7
3.5
3.6
15,957
16,712
19,000
20,800
23,000
24,500
-14.8
4.8
13.7
9.5
10.6
6.5
9,892
10,297
11,300
12,200
13,000
13,700
% change
-10.8
4.4
9.7
8.0
6.6
5.4
382,000
384,000
396,000
406,000
418,000
429,000
-4.5
0.8
3.1
2.5
3.0
2.6
470,000
475,000
501,000
514,000
530,000
542,000
-7.3
1.1
5.5
2.6
3.1
2.3
314,500
315,000
320,000
329,000
337,000
345,000
All Units
% change
Condo Apartment
% change
Row/Duplex
% change
Sales
% change
Listings
% change
Average Price
% change
Total
% change
Single-Detached
% change
Multi-family
% change
Rental Vacancy Rate
2014
% change
Detached
Housing Starts, Units
2013
Row/Duplex
% change
MLS® Activity
2012
Vacancy Rate
-3.2
0.0
1.6
2.8
2.4
2.4
348,000
347,500
357,000
365,000
372,000
382,000
-5.4
0.1
2.7
2.2
1.9
2.7
67,637
72,936
80,000
84,000
88,000
92,000
-11.8
7.8
9.7
5.0
4.8
4.5
158,888
147,209
153,000
159,000
164,000
168,000
-1.2
-7.4
3.9
3.9
3.1
2.4
514,836
537,414
566,000
570,000
580,000
600,000
-8.3
4.4
5.3
0.7
1.8
3.4
27,465
27,054
27,200
28,300
29,300
31,000
4.0
-1.5
0.5
4.0
3.5
5.8
8,333
8,522
9,300
9,500
9,700
10,000
-6.0
2.3
9.1
2.2
2.1
3.1
19,132
18,532
17,900
18,800
19,600
21,000
9.1
-3.1
-3.4
5.0
4.3
7.1
2.8%
2.5%
2.3%
2.2%
2.2%
2.1%
Source: Landcor Data Corp, Canadian Real Estate Association,
Economic Analysis of British Columbia
10
Central 1 Credit Union
Real Residential Investment ($2007 Millions): British Columbia
Real Residential Investment (Millions)
% Change
Total New Dwellings
% Change
Renovations
% Change
Total Acquisition Costs
% Change
2012
2013
2014
2015
2016
2017
18,490
18,346
18,709
19,311
20,037
20,970
9.1
-0.8
2.0
3.2
3.8
4.7
8,521
8,395
8,520
8,922
9,304
9,800
12.8
-1.5
1.5
4.7
4.3
5.3
7,303
7,256
7,400
7,545
7,801
8,107
4.5
-0.6
2.0
2.0
3.4
3.9
2,434
2,459
2,550
2,600
2,680
2,801
12.1
1.0
3.7
2.0
3.1
4.5
Source: Statistics Canada, Canadian Real Estate Association, Central 1 Credit Union Forecast
Economic Analysis of British Columbia
11
Central 1 Credit Union
Annual Residential Resale Transactions by Development Region
Vancouver Island/Coast
% change
Lower Mainland/Southwest
% change
Thompson/Okanagan
% change
Kootenay
% change
Cariboo
2012
2013
2014
2015
2016
2017
10,796
11,427
12,300
13,400
14,200
14,700
-5.9
6.3
7.6
8.9
6.0
3.5
37,561
38,582
45,000
46,700
49,400
51,700
-17.7
3.4
16.6
3.8
5.8
4.7
8,394
9,122
10,000
10,700
11,600
12,400
5.5
9.1
9.6
7.0
8.4
6.9
2,237
2,368
2,600
2,750
2,900
3,100
4.1
6.3
9.8
5.8
5.5
6.9
2,193
2,174
2,250
2,500
2,700
2,900
% change
5.1
-0.7
3.5
11.1
8.0
7.4
North Coast
880
1,049
1,300
1,350
1,350
1,325
% change
26.8
20.0
23.9
3.8
0.0
-1.9
453
385
450
500
575
620
-1.5
-14.4
16.9
11.1
15.0
7.8
1,284
1,143
1,175
1,250
1,350
1,450
2.1
-11.0
2.8
6.4
8.0
7.4
63,798
66,250
75,075
79,150
84,075
88,195
-11.1
4.4
13.3
5.4
6.2
4.9
2012
2013
2014
2015
2016
2017
32,433
33,477
38900
40500
43000
45000
Nechako
% change
Northeast
% change
Province
% change
Select Regional Districts
Greater Vancouver
% change
Capital
% change
Central Okanagan
% change
Fraser Fort-George
% change
Fraser Valley
% change
Nanaimo
% change
Thompson-Nicola
% change
-19.7
3.9
16.2
4.1
6.2
4.7
4,886
5,054
5,600
6000
6500
6,800
-4.7
3.8
10.8
7.1
8.3
4.6
3,064
3,452
3800
4000
4200
4350
5.0
13.0
10.1
5.3
5.0
3.6
1,367
1,427
1450
1580
1700
1800
0.4
4.5
1.6
9.0
7.6
5.9
3,793
3,744
4300
4600
4900
5200
-5.2
-1.1
14.9
7.0
6.5
6.1
2,504
2,718
3000
3150
3300
3500
-5.2
8.9
10.4
5.0
4.8
6.1
2,005
2,139
2200
2400
2650
2850
2.5
7.1
2.9
9.1
10.4
7.5
Source: Landcor Data Corp, Central 1 Credit Union Forecast
Economic Analysis of British Columbia
12
Central 1 Credit Union
Median Annual Residential Price by Development Region
Vancouver Island/Coast
% change
Lower Mainland/Southwest
% change
Thompson/Okanagan
% change
Kootenay
% change
Cariboo
% change
North Coast
% change
Nechako
% change
Northeast
% change
Province
% change
2012
2013
2014
2015
2016
2017
335,000
332,000
330,000
334,000
337,000
343,000
-1.5
-0.9
-0.6
1.2
0.9
1.8
472,000
480,000
497,000
512,000
527,000
543,000
-3.3
2.1
3.5
3.0
2.9
3.0
315,000
313,000
314,000
317,000
322,000
328,000
0.0
-0.6
0.3
1.0
1.6
1.9
238,000
236,250
230,000
233,000
236,000
239,000
1.7
-0.7
-2.6
1.3
1.3
1.3
197,308
200,000
202,000
206,000
210,000
214,000
2.2
1.5
1.0
2.0
1.9
1.9
151,500
185,000
188,000
192,000
200,000
210,000
8.2
21.7
1.6
2.1
4.2
5.0
172,000
195,000
190,000
195,000
200,000
206,000
5.4
14.0
-2.6
2.6
2.6
3.0
259,750
277,500
294,000
305,000
315,000
322,000
10.5
6.7
5.9
3.7
3.3
2.2
382,000
384,000
396,000
406,000
418,000
429,000
-4.5
0.8
3.1
2.5
3.0
2.6
Select Regional Districts
Greater Vancouver
% change
Capital
% change
Central Okanagan
% change
Fraser Fort-George
% change
Fraser Valley
% change
Nanaimo
% change
Thompson-Nicola
% change
2012
2013
2014
2015
2016
2017
505,000
515,000
542,000
557,000
575,000
595,000
-2.9
3.0
5.2
2.8
3.2
3.5
445,000
432,750
434,000
440,000
449,000
458,000
-1.5
-2.8
0.3
1.4
2.0
2.0
369,000
357,500
367,000
371,000
378,000
383,000
-0.3
-3.1
2.7
1.1
1.9
1.3
210,000
213,000
216,000
218,000
225,000
232,000
2.8
1.5
1.4
0.9
3.2
3.1
320,000
319,500
322,000
325,000
329,000
335,000
3.9
-0.2
0.8
0.9
1.2
1.8
308,000
305,000
305,000
307,000
311,000
315,000
-3.0
-1.0
0.0
0.7
1.3
1.3
295,000
298,000
292,000
295,000
300,000
303,000
2.3
0.8
-2.0
1.0
1.7
1.0
Source: Landcor Data Corp, Central 1 Credit Union Forecast
Economic Analysis of British Columbia
13
Central 1 Credit Union
Total Housing Starts by Development Region
2012
2013
2014
2015
2016
2017
3,173
2,835
2,650
2,900
3,050
3,150
-0.7
-10.7
-6.5
9.4
5.2
3.3
19,922
19,988
19,300
19,700
20,500
22,000
Vancouver Island/Coast
% change
Lower Mainland/Southwest
% change
Thompson/Okanagan
5.8
0.3
-3.4
2.1
4.1
7.3
1,645
1,865
1,975
2,200
2,300
2,350
-6.7
13.4
5.9
11.4
4.5
2.2
% change
Kootenay
% change
Cariboo
% change
North Coast
73
82
65
80
90
105
-2.7
12.3
-20.7
23.1
12.5
16.7
301
276
250
300
350
400
26.5
-8.3
-9.4
20.0
16.7
14.3
23
30
40
50
65
65
% change
-23.3
30.4
33.3
25.0
30.0
0.0
Northeast
361
578
500
490
475
475
% change
63.3
60.1
-13.5
-2.0
-3.1
0.0
Urban B.C.
25,498
25,654
24,780
25,720
26,830
28,545
% change
4.7
0.6
-3.4
3.8
4.3
6.4
27,465
27,054
27,200
28,300
29,300
31,000
4.0
-1.5
0.5
4.0
3.5
5.8
Total B.C. Housing Starts*
% change
* includes rural areas
Source: Canada Mortgage and Housing Corporation, Central 1 Credit Union Forecast
Greater Vancouver Resale transactions
All Units
2012
2013
2014
2015
2016
2017
32,205
33,477
38,900
40,500
43,000
45,000
% change
-20.0
3.9
16.2
4.1
6.2
4.7
Detached
14,572
15,205
18,000
17,900
18,200
18,500
% change
Condo Apartment
% change
Attached
% change
-23.3
4.3
18.4
-0.6
1.7
1.6
11,758
12,203
14,000
15,400
16,800
18,000
-17.7
3.8
14.7
10.0
9.1
7.1
5,528
5,730
6,500
7,000
7,600
8,300
-16.9
3.7
13.4
7.7
8.6
9.2
Greater Vancouver Resale Median Price
All Units
2012
2013
2014
2015
2016
2017
500,100
515,000
542,000
557,000
575,000
595,000
% change
-3.8
3.0
5.2
2.8
3.2
3.5
Detached
723,000
755,000
810,000
837,000
870,000
902,000
% change
Condo Apartment
% change
Attached
% change
-3.6
4.4
7.3
3.3
3.9
3.7
352,000
357,500
367,000
375,000
383,000
391,000
-1.5
1.6
2.7
2.2
2.1
2.1
415,000
415,000
423,000
433,000
445,000
460,000
-4.4
0.0
1.9
2.4
2.8
3.4
Source: Landcor Data Corp, Central 1 Credit Union Forecast
Economic Analysis of British Columbia
14
Central 1 Credit Union
Economic Forecast Summary Table
2012
2013
2014
2015
2016
2017
Real GDP, % Change
1.5
2.0
2.4
2.7
3.7
4.7
Employment, % Change
1.7
-0.2
1.2
1.8
1.9
2.3
Unemployment Rate, (%)
6.7
6.6
6.4
5.9
5.8
5.1
Population, % Change
1.0
0.9
1.0
1.0
1.1
1.3
Housing Starts (000s)
27.5
27.1
27.2
28.3
29.3
31.0
Personal Income, % Change
4.4
2.1
3.4
5.0
6.1
6.9
Consumer Price Index, % Change
1.1
0.2
1.6
2.3
1.7
2.0
Statistics Canada, Central 1 Credit Union Forecast
Population components: British Columbia
Population, 000s
2012
2013
2014
2015
2016
2017
4,543.3
4,582.0
4,625.5
4,672.0
4,724.4
4,783.8
1.0
0.9
1.0
1.0
1.1
1.3
32.6
27.4
33.6
37.1
43.5
51.0
35.3
35.2
34.9
33.3
37.9
43.6
-2.7
-7.9
-1.3
3.8
5.6
7.4
% change
Net In Migration (000s)
Net International(000s)
Net Interprovincial (000s)
Statistics Canada, Central 1 Credit Union Forecast
Posted Fixed Term Mortgage Rates
2012
2013
2014
2015
2016
2017
Prime
3.00
3.00
3.00
3.05
3.55
4.10
1-Year
3.18
3.08
3.18
3.40
3.80
4.20
3-Year
3.91
3.74
3.78
4.05
4.40
4.70
5-Year
5.27
5.23
4.90
5.20
5.50
5.75
Source: Statistics Canada, Central 1 Credit Union Forecast
Terms
Published by the Economics Department of Central 1 Credit Union, 1441 Creekside Drive, Vancouver, B.C. V6J 4S7 © Central 1 Credit Union, 2011.
This work may not be reproduced in whole or part, by photocopy or other means, without permission of Central 1 Credit Union.
Economic Analysis of British Columbia (the “Analysis”) may have forward-looking statements about the future economic growth of the Province of B.C. and
its regions. These statements are subject to risk and uncertainty. Actual results may differ due to a variety of factors, including regulatory or legislative
developments, competition, technological change, global capital market activity and general economic conditions in Canada, North America or internationally.
This list is not exhaustive of the factors that may affect any of the Analysis’ forward-looking statements. These and other factors should be considered carefully
and readers should not place undue reliance on the Analysis’ forward-looking statements.
The Analysis and Central 1 Credit Union disclaims any and all warranties, whether express or implied, including (without limitation) any implied warranties of
merchantability or fitness for a particular purpose. The Analysis and Central 1 Credit Union will not accept any responsibility for the reader’s use of the data and / or
opinions presented in the Analysis, or any loss arising therefrom.
Chief Economist: Helmut Pastrick
Economist: David Hobden
Economic Analysis of British Columbia
Economist: Bryan Yu
Production: Judy Wozencroft
15

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