CMHC Housing Outlook Session: Forecast for Vancouver Housing Market
August 18, 2010
Presenter: Robin Adamache Senior Market Analyst for Vancouver Region
August 18,2010, Vancouver - Senior Market Analyst, Robin Adamache began her session by talking about the overall economy in BC. Real GDP up 2.7% in BC although what happens in the USA affects us directly in GDP, so predictions must be done with an eye on how conditions are in the States.
Lower mainland is looking forward to 29 Billion in major projects in the next year…including the New Surrey Hospital and the Evergreen Line. Job growth is at 2% vs. a decline last yr of half a percent. Good solid full time jobs are being created, Ms Adamache quipped that these were not “McJobs”.
Migration growth continues at the same pace as last year’s 58 thousand new migrants into Vancouver area. There will be approx 18 thousand new households in need of housing each year over the next few years if not longer.
The CMHC expects that there will be a gradual increase in interest rates next year. Robin made a point of reminding everyone that interest rates have been at a historic low for a sustained period of time. Any increases will be gradual, but they are expected.
Canada remains about 20 times lower than the US in mortgage defaults. In short, Vancouver has a stable economic environment. There are lots of people moving here and buying here. The question was asked, “Who is buying?” 6% of existing Vancouverites plan to buy. One third of buyers will be first time home buyers, while sixty percent are move-up buyers, and 25% are downsizing.
Despite all of this seeming good news, the reason it is not a crazy hot market is partly due to the changes in lending policies, and the rise in interest rates. The market is in the “balanced” range of 40 to 60% of the sales to listings ratio. Prices will rise next year at about the rate of inflation. There is an ample supply of listings in the West Side. Peak prices were reached earlier this year, but have dropped slightly since. The activity in house sales has shifted to the higher price ranges. 57% of the activity on the MLS has been in the 1.25 to 2.25 million dollar range. Downtown condo prices have dropped by around 3%. Coal harbour average condo price per sq ft is 852; False Creek = 805; West End = 605.
Price growth in 2010 will close out in the average range of 9 -11% due to the price growth and activity earlier in the year. Speculative activity is not an issue and is down according to statistics. Research shows that the speculators left the market in 2006 and have not been a factor since. While average mortgage carrying costs remain higher than average rents, the vacancy rate is at 1.7% in Vancouver.
Economic conditions in the Vancouver CMA will be favourable for the housing market this year and next
Major projects worth approximately 28 Billion are proposed for the Lower Mainland area
As the economy gets traction, some of these proposed projects and some of the 4 Billion worth of project currently on hold will move forward
Vancouver’s job market is also expected to pick up as the economy improves over the next eighteen months
Population growth will add to housing demand, an estimated 40,000 people are expected to move to the Vancouver region each year, adding about 18,000new households in need of housing
It will be important to keep an eye on higher mortgage rates which may dampen homeownership demand, especially for those who are more sensitive to the impact of higher rates.