Balanced Housing Market
Housing demand in the province has now almost fully recovered from the downturn recorded in 2012. However, the spillover effect of a sluggish provincial economy and stalled employment growth over the past year will likely constrain housing demand over the next few quarters.
A more robust economy is expected to put housing demand back on an upward trajectory during the second half of the year and through 2015.
While 2013 was the second consecutive year of relatively weak economic growth, stronger conditions are expected to emerge this year. BC exports should accelerate as a result of stronger global economic growth, led by a resurgent US economy, and a favourable exchange rate. In addition, a return to more typical employment growth will help stem the exodus of workers to other provinces and bolster household growth. Consumers also appear to be awakening from their year-long slumber as retail sales growth climbs out of the doldrums. Finally, while interest rates are forecast to remain low through most of this year, their inevitable normalization is expected to act as a counterbalance to more robust economic fundamentals and keep housing demand from outstripping supply.
Market conditions are expected to post further improvement this year, with Greater Vancouver, the Fraser Valley and BC Northern further bolstering their balanced market status. Stronger consumer demand is also likely to pull Victoria into balance conditions this year and trend most other regions towards more equilibrium between supply and demand. Seller’s market conditions are not expected to prevail over the next two years, meaning home prices in most markets won’t likely rise much higher than overall inflation.
Housing starts are keeping relative pace with household formation. However, supply imbalances do exist in some communities. New construction activity is estimated to be up 1 per cent last year to 27,750 units, on the strength of an 8 per cent rise in single-detached starts. Housing starts are forecast to remain relatively unchanged this year, albeit increasing 0.2 per cent to 27,800 units. Stronger economic and housing market conditions in 2015 are expected to generate a further 2.9 per cent increase to 28,600 units.
Source: BC Real Estate Association Housing Forecast Update First Quarter Jan 2014
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
Kristina’s Comments in a Nutshell:
We’ve almost recovered from the slump in 2012. In most areas of South Surrey / White Rock and the Lower Mainland it’s a balanced market (of buyer demand and seller inventory) and it is expected to stay that way for a couple of years. The second half of 2014 and 2015 are forecast to be more active than the first half of 2014.