Greater Vancouver’s real estate market is likely to come off the boil without bubbling over, according to a new housing market outlook by the Canada Mortgage and Housing Corporation issued May 18.
The federal housing agency forecast that sales in 2016 will increase only slightly over 2015, and then reduce next year.
The report said, “MLS® sales are forecast to remain between 42,000 and 45,000 units in 2016 and dip to 34.000 to 38,100 units in 2017 (Figure 3). Sales will remain above the five-year average level of almost 33,000 sales in both forecast years, based on strong job and population growth.”
CMHC also asserted that the dearth of new home listings would ease, as high sales prices encourage more people to list their homes. The outlook added, “The current imbalance between sales and listings is expected to unwind during the next 18 months as sales levels moderate and more listings are added. The steep increases in resale home prices that have resulted from sustained seller’s market conditions are anticipated to draw more listings onto the market.”
This will result in average home price growth that continues on its upward trajectory in 2016, but rises at a slower rate in 2017, according to the CMHC.
“An expected increase in listings coupled with the return of sales to levels in line with population and employment growth, will result in more moderate price growth later this year and in 2017. The average MLS® price in Greater Vancouver increased 26 per cent, year-over-year, in the first quarter of 2016.”
The report projected that the average MLS® resale price would be between $1.022 million and $1,128 million in 2016 and from $1.045 million to $1.179 million in 2017. (Note that average prices used by CMHC are higher than benchmark and median prices used by real estate boards, as they are skewed upwards by high-end property prices.)
As with home sales, the outlook said that new housing construction starts in Metro Vancouver are expected to increase slightly this year before slowing in 2017 as demand cools.
It added, “However, starts will remain above the five-year average level of just over 19,000 units in both years, ranging from 24,200 and 25,400 units in 2016 and from 21,200 to 23,000 units in 2017.”
Read CMHC's recent report identifying strong risks of overvaluation in Vancouver's housing market
Across BC, housing starts are expected to follow a similar pattern, with a steep increase this year and a slight relative drop next year, but output levels in both years still forecast to be higher than 2015.
Unsurprisingly, home prices across the province are also forecast to trend in the same pattern as Greater Vancouver, rising in both years but slowing their rate of growth next year, averaging between $718,000 and $756,600 in 2016 and between $722,900 and $786,100 in 2017.
Across Canada, it was a different story for housing starts, with growth in BC and Ontario offset by declines in other provinces, leading to an overall reduction of starts in 2016 and 2017, compared with last year.
However, prices were forecast to continue to grow, with the national average price expected to be between $474,200 and $495,800 in 2016 and between $479,300 and $501,100 in 2017 – compared with $442,999 in 2015.
The regional and national outlook reports come just after CMHC changed its position on housing risk factors in Vancouver, in a report that said there was strong evidence of overvaluation in the local real estate market.
Below, Carol Frketich, CMHC's regional economist for British Columbia, discusses highlights of the updated housing market outlook for BC.