SUMMARY

The Business Council of British Columbia has downgraded their economic forecast for 2020 and warned people to “buckle up and keep calm” amid continuing fears over the spread of COVID-19.  In addition, market analyst Michael Ferreira is sounding an alarm about a steep drop-off in condo and townhome presales in Metro Vancouver. Mr. Ferriera warns that this could indicate a cut in new supply of housing which won’t be felt until 2022, as construction starts from 2019 reach completion. This could lead to another steep increase in pricing down the line.  In some good news, the federal government has announced new mortgage stress test rules, set to be implemented in April, which analysts predict will increase would-be borrowers’ purchasing power.  In addition, the population growth in BC continues to increase, leading to the announcement of a number of new infrastructure and housing projects throughout the province.

IN THE NEWS

The Business Council of British Columbia has downgraded its 2020 forecast for BC amid economic turbulence and COVID-19 fears.  The initial forecast had predicted economic growth of about two per cent for the year, but with the rapid spread of COVID-19 the Council is now forecasting growth of around 1.4% – 1.5% under an optimistic scenario, and growth of under one per cent or even the possibility of a recession should the spread of the virus accelerate.  The brunt of the economic impact will likely be felt in air transportation, tourism and hospitality however BC will likely also feel a hit relating cancelled conferences and public events.  According to the Council’s chief economist Ken Peacock, there are a few bright spots in the forecast, including the Bank of Canada’s rate cut and an expected economic rebound in 2021.1

BC real estate market analyst Michael Ferreira is sounding the alarm about a steep drop-off in condo and townhome presales in Metro Vancouver.  The regional data indicates that there was a 60% drop in new condo and townhouse units coming to market for 2019.  According to Ferreira, the impact of the presale slide is currently hidden since presale units usually take about three years to reach completion.  This means the cut in new supply won’t be felt until into 2022.  This could lead to another spike in pricing like we saw a few years ago.  The dip in presales, which is significant as developers usually need to sell 60-70% of the units to secure financing, comes amid concerns about the NDP’s efforts to cool the housing market and skyrocketing insurance costs.  Finance Minister Carole James said the government is working with industry and they hope to have some ideas for a fix in the next few weeks.2

It’s not all bad news for the housing market, however, as the federal government has announced new mortgage stress test rules that should make it easier for people to pass.  In the present stress test, a would-be borrower is tested against their ability to pay down their debts at the five-year interest rate posted by the big banks, which currently sits at 5.19%.  Under the new rules, which are set to be implemented in April, the new test rate will be “the weekly median five-year fixed insurance mortgage rate from mortgage insurance applications, plus two per cent.”  The change is meant to ensure that people take on mortgages that are appropriate for the situation and allows the test to adjust to dynamic market conditions.  According to market analysists, this is a welcome change that should boost buying power.3

In other positive news, BCs population continues to grow, rising by more than 70,000 people last year – an increase of 1.7% over 2018.  Almost 40,000 of these new residents moved into the Metro Vancouver Regional District between 2018 and 2019.  Surrey leads BC’s population growth with a gain of 16,382 people.  To keep up with Surrey’s growth, a number of infrastructure upgrades have recently been announced including the SkyTrain expansion, Pattullo Bridge repairs, and five to six modular buildings of affordable housing units.  Squamish saw a 2.9% drop in population, though Mayor Karen Elliott says that residential vacancy rates are close to zero, businesses are doing well and, while the real estate market has slowed, new buildings are still being built.4


STATS AT-A-GLANCE


BC UNEMPLOYMENT RATES 5
Regions Rate from Feb 2020 to Mar 2020
Rate from Jan 2019 to Feb 2020
Northern B.C. 10.1% 10.2%
Southern Coastal 7.6% 7.1%
Southern Interior 6.8% 6.4%
Vancouver 4.5% 4.6%
Victoria 4.3% 4.4%

REAL ESTATE ACTIVITY (RESIDENTIAL) BY REGION

Greater Vancouver 6

  • Units sold: 44.9% increase from February 2019
  • Active listings: 20.7% decrease from February 2019
  • New listings: 2.8% increase from February 2019
  • Benchmark price: $1,020,600.00 (0.3% increase from February 2019)*

Victoria7

  • Units sold: 33.7% increase from February 2019
  • Active listings: 0.19% decrease from February 2019
  • Benchmark price: $868,100.00 (3.5% increase from February 2019 for detached homes)*

Fraser Valley8

  • Units sold: 37.7% increase from February 2019
  • Active listings: 10.4% decrease from February 2019
  • New listings: 15.4% increase from February 2019
  • Benchmark price: $971,300.00 (1.3% increase from February 2019 for detached homes)*

Okanagan/Shuswap/Revelstoke9

  • Units sold: 6.94% increase from February 2019
  • Active listings: 5.11% decrease from February 2019
  • New listings: 6.59% decrease from February 2019
  • Average residential price: $568,716.00 (10.72% increase from February 2019)

Northern BC10

  • Units sold: 7.4% decrease from February 2019
  • Active listings: 5.3% increase February 2019
  • New listings: 6.2% decrease from February 2019
  • Average residential price: $301,209.00.00 (4.6% increase from February 2019)

*Benchmark based on the MLS HPI® benchmark for single family detached homes.

Sources:

  1. https://www.timescolonist.com/business/greater-victoria-real-estate-sales-prices-expected-to-rise-1.24060059
  2. https://globalnews.ca/news/6611441/metro-vancouver-presale-dropoff-condos-townhouses/?utm_medium=Facebook&utm_source=GlobalBC
  3. https://www.westerninvestor.com/news/british-columbia/developers-paint-bleak-picture-of-metro-vancouver-s-future-under-status-quo-1.24060558
  4. https://bc.ctvnews.ca/insurance-issues-could-cause-b-c-condo-market-collapse-homeowners-association-warns-1.4800633
  5. https://srv129.services.gc.ca/ei_regions/eng/rates_cur.aspx
  6. https://www.rebgv.org/market-watch/monthly-market-report/february-2020.html
  7. https://www.vreb.org/current-statistics
  8. http://fvreb.bc.ca/statistics/Package202002.pdf
  9. https://www.omreb.com/files/01-CO%20Statistics-Feb2020.pdf
  10. http://www.bcnreb.bc.ca/creastats

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