This week’s top stories focus on the latest reports and analysis tackling predictions of what’s to come for Metro Vancouver’s housing markets across the next couple years, both in terms of pricing and sales volumes. In addition, the City of Vancouver announced new protective measures for tenants in the rental sector.
Here is Western Investor’s pick of the most buzz-worthy real estate stories published this week.
Overall real estate market downturn will be relatively short-lived, according to Reuters poll of market analysts.
The housing market downturn in Metro Vancouver will persist this year, and stay flat in 2010, but will recover in 2021 – that’s the consensus from a Reuters poll of 20 market analysts nationwide.
Home prices in the region will be “likely down 1.0 per cent this year, then up 0.2 per cent next year and 3.0 per cent in 2021,” Reuters reported February 22.
Across Canada as a whole, the chances of a nationwide price correction are being pegged at around 20 per cent, the survey found.
Reuters said of the national outlook, “House prices are forecast to rise just 1.1 per cent this year on an average basis, followed by 1.9 per cent in 2020 and then 3 per cent in 2021.” However, this forecast was “based on a smaller sample of contributors willing to look that far into the future.”
The news agency said that one reason for the relatively subdued national market activity, compared with recent years, was a slowing in demand and a shift towards rental over homeownership.
The survey report quoted Sebastien Lavoie, chief economist at Laurentian Bank Securities, as saying, “The stars are aligned for further strengthening in activity in the rental market: demand coming from atypical jobs and immigration, higher rates restraining some households to buy a home, the preference of millennials to delay the purchase of a home later in their life cycle.”
In B.C., however, the provincial government is taking credit for the downturn in local home prices, following its wide-ranging housing taxation policies tabled in the 2018 B.C. Budget. These include the B.C. Speculation and Vacancy Tax and the so-called School Tax on homes valued above $3 million.
However, the 2019 Budget, presented February 19, showed the government is also expecting the market downturn to be of short duration. The budget documents forecast home sales this year across the province would rise three per cent, with revenues from residential taxes expected to increase over the next few years.
Real estate association offers optimistic forecast, saying buyers are gradually “adjusting” to mortgage stress test.
Home sales in B.C. are likely to rise slightly this year, and more in 2020, according to a forecast released February 25 by the B.C. Real Estate Association (BCREA).
The association said it expects residential sales in the province to rise two per cent to 80,000 units this year. This follows a slow 2018 in which 78,345 homes traded hands on B.C.’s MLS®, which was 24.9 per cent lower than in 2017.
BCREA also predicted home sales to increase a further 6.9 per cent to 85,500 units in 2020. This would be a very normal level of activity, as the 10-year average for home sales in the province is 85,800 units.
The association said that the mortgage stress test introduced January 2018 would keep the market dampened, but that buyers were getting accustomed to it and its effects would be gradually outweighed by rising demand.
The report said, “Modest improvement in consumer demand is expected to unfold over the next two years as households further adjust to the mortgage stress test.”
Cameron Muir, BCREA Chief Economist, said, “The negative shock to affordability and purchasing power created by the B20 stress test on mortgage borrowers is expected to continue constraining housing demand in the province this year.”
However, he added, “Favourable demographics along with continuing strong performance of the BC economy is expected to underpin housing demand over the next two years.”
BCREA said that the slow market has seen a rise in the number of homes for sale, which will keep prices flat.
The report said, “Market conditions are expected to provide little upward pressure on home prices this year, with the average annual residential price forecast to remain essentially unchanged, albeit up 0.5 per cent to $716,100.”
The association broke down its forecast for both home sales and prices by region. Greater Vancouver, having seen the province's biggest home sales decline last year, will bounce back the furthest over the next two years, according to BCREA. Unit transactions in the region are predicted to rise 5.8 per cent in 2019 and 13.2 per cent in 2020. However, Greater Vancouver home prices are expected to slide this year, and only recover some of those losses in 2020.
Victoria and Vancouver Island are predicted to see lower home sales in 2019 and 2020 than in 2018, but prices are forecast to edge slightly upwards.
Cooling real estate market to hamper B.C. economy in next two years, says think tank – Business in Vancouver
Downward trend in home sales is offsetting gains made in energy sector, reports Conference Board of Canada.
The Conference Board of Canada is forecasting at least two more years of slowing growth ahead for the province amid a cooling real estate market.
The Ottawa-based think tank’s latest provincial outlook, released February 27, estimates real GDP growth in B.C. will fall from 2.6 per cent in 2018 to 2.5 per cent this year.
The Conference Board said that downward trend will continue into 2020 with real GDP growth projected to fall to 2.4 per cent, “despite ongoing megaprojects in the energy sector.”
Last fall LNG Canada announced its five partners had made a final investment decision on the $40 billion project to be based out of Kitimat, B.C.
The project has two main components: the LNG plant and marine terminal in Kitimat, and the $4.8 billion Coastal GasLink pipeline, which is being built by TransCanada Corp. (TSX:TRP) to bring natural gas from northeastern B.C. to Kitimat.
Meanwhile, the province is coming off tremendous economic growth — charting at an average of 3.2 per cent from 2014-17 — fuelled largely by demand for real estate.
The booming real estate market, which has benefitted everything from the construction industry to the banks, also contributed significantly to an affordability crisis for many regions in B.C.
Both Ottawa and Victoria have introduced measures, such as a mortgage stress test and a foreign buyer tax, respectively, to cool the market.
This month the Real Estate Board of Greater Vancouver revealed the region registered 1,103 sales in January — down 39.3 per cent from a year earlier.
“With the housing market slowing, investor approval of LNG Canada’s liquefied natural gas terminal and pipeline in late 2018 came at an opportune time for the province. The first phase of the development will provide a substantial boost to the province’s real GDP between now and the middle of the next decade,” the Conference Board said in its outlook.
City plans to pilot a new notification system that will inform renters of their tenancy rights by mail.
The City of Vancouver plans to pilot a new notification system that will inform renters of their tenancy rights by mail when the city receives a permit application to develop select recently sold rental buildings.
It’s among a series of measures designed to improve renters’ circumstances, which are outlined in a press release issued by the city Feb. 27.
Renters represent more than half — 53 per cent — of Vancouver’s population and have been increasingly vocal about their plight in a city whose tight vacancy rate has averaged 0.9 per cent over the last three years.
Many have complained about renovictions, demovictions and an inability to find affordable places to live even if they earn reasonable salaries.
Aside from introducing the notification system, city staff are also planning to update the Tenant Relocation and Protection Policy.
Many have complained about renovictions, demovictions and an inability to find affordable places to live even if they earn reasonable salaries.They are consulting with interest groups and plan to present council with an updated policy in June 2019.
Options under consideration include:
- Strengthening the first-right-of-refusal provision by providing increased affordability for low income and vulnerable renters
- Adding a temporary relocation option for renovations
- Increasing communication between landlords and tenants and increasing city staff oversight of this outreach
- Developing options for social housing providers that focus on rehousing, rather than compensation.
- In April, meanwhile, staff will report to council on ways in which a Renters Office could be developed. The city has already hired its first staff member — a renter advocacy and support services officer — for the office and created a renters enquiry line.
Once it’s set up, the Renters Office’s aims to improve city services for renters, to collaborate with and support external community-based, renter-serving organizations, and to work with rental advocates to support renters affected by renovation and redevelopment.
The city is also working with the provincial government’s Rental Tenancy Board to improve renter protection and to “ensure greater clarity is provided to city staff, tenants, and the public regarding whether planned work on rental properties justifies eviction of tenants.”
Measures to deal with the fact that much of the existing rental stock, which is often more affordable, is aging and in need of upgrades, are also in the works.
Since 2010, more than 7,000 new rental units have been approved, built or are under construction, but far fewer rental units were built between 1980 and 2009.