Slower Growth Expected for Economy and Housing Market
BCREA 2018 Second Quarter Housing Forecast Update
Vancouver, BC – May 31, 2018. The British Columbia Real Estate Association (BCREA) released its 2018 Second Quarter Housing Forecast today.
Multiple Listing Service® (MLS®) residential sales in the province are forecast to decline 9 per cent to 94,200 units this year, after posting 103,700 unit sales in 2017. MLS® residential sales are forecast to remain relatively unchanged in 2019, albeit down 0.2 per cent to 94,000 units. Housing demand is expected to remain above the 10-year average of 84,800 units into 2020.
“The housing market continues to be supported by a strong economy,” said Cameron Muir, BCREA Chief Economist. “However, slower economic growth is expected over the next two years as the economy is nearing full employment and consumers have stepped back from their 2017 spending spree.”
“Demographics will play a key role in the housing market over the next few years,” added Muir, “as growth in the adult-aged population is bolstered by immigration and the massive millennial generation enters its household forming years.”
Muir notes there are, however, significant headwinds in the housing market. “Rising mortgage interest rates will further erode affordability and purchasing power, with the effect being exacerbated by an already high price level. The legacy of tougher mortgage qualifications for conventional mortgagors will be a reduction of their purchasing power by up to 20 per cent, and the provincial government’s expansion of the foreign buyer tax and several other policies aimed at taxing wealth is sending a negative signal to the market and likely diverting investment elsewhere.”
The combination of slowing housing demand and rising new home completions is expected to trend most BC markets toward balanced conditions this year, and lead to less upward pressure on home prices.