SUMMARY

The BC Real Estate Association predicts strong growth in the real estate market, both in terms of sale prices and numbers of sales. However, numerous stakeholders are warning that the government will need to implement more supply-side policies, rather than continuing the concentration on demand-side policies like the mortgage stress test, in order to create a more balanced market capable of meeting the increased housing demand of a quickly growing population. Finally, there is some concern that the recent dramatic increase in insurance premiums could lead to the collapse of BC’s condominium market as hundreds of condo complexes in the Lower Mainland risk losing their strata insurance, rendering lenders unwilling to advance mortgages in the affected properties.

IN THE NEWS

In its 2020 first quarter housing forecast, the BC Real Estate Association predicts a province-wide trend of higher prices and stronger sales numbers. Brendon Ogmundson, the Association’s chief economist, notes that momentum from the end of 2019 has out the housing market on more solid footing, but the supply of homes has not been able to match the demand. Mr. Ogmundson predicts that the average house price will rise by 4.8% this year in BC, and by 3.8% in 2021. At the same time, Mr. Ogmundson predicts that the total provincial sales numbers will climb by 10.3% this year, and by 6.3% in 2021.1

Also recognizing a dearth of available housing, Scotiabank president and CEO Brian Proter argues that Canada’s housing market needs more supply, not more attention to demand-side policies such as the mortgage stress test. Canada’s fast growing population, driven largely by its success in attracting immigrants, strong employment levels, rising wages, and low long-term interest rates have lead to a rebound in the Canadian real estate market, but builders can’t keep up with population growth as they lack workers to build enough homes, but also because of municipal and provincial governmental regulations that restrict construction. Royal Bank of Canada CEO Dave McKay agrees, stating that housing demand will continue to increase whether or not it is managed by the mortgage stress test – what is needed is more housing supply.2

Real Estate developers in Metro Vancouver argue that demand-side policies and a lack of collaboration between governments and the private sector will result in stunted growth and further supply and affordability problems. Beau Jarvis, president of Wesgroup Properties, says that municipalities continue to develop policies that undermine developers’ abilities to deliver housing. Mr. Jarvis states that if the province does not hold off on demand-side measures and start implementing supply-side solutions then developers will continue to underbuild. Chuck We, senior VP for Hudson Pacific Properties, pointed to the estimated 50 million square feet of additional office space that would be needed in Vancouver by 2050, largely due to growth in the technology industry. Noting that the growth in the technology industry will also result in thousands of workers coming into Downtown Vancouver to look for housing, Jon Stovell, president and CEO of Reliance Properties, argues that developers and governments are going to need to get imaginative in designing reasonably priced housing, work and recreational spaces.3

Imaginative thinking may also be needed to save BC’s condominium market from collapse.  Tony Gioventu, executive director of the Condominium and Homeowners Association of BC, warns that recent changes to insurance rates means that some buildings pay more for coverage while others are being denied altogether. One strata complex in Burnaby is facing an increase from $200,000/year to $810,000/year.  Property managers for a building in Surrey tried five different insurance brokers, none of which would insure their complex. A condo sale in the Surrey complex recently fell through when the lender pulled mortgage approval after learning the building was uninsured. According to Mr. Gioventu, there are hundreds of buildings across the Lower Mainland facing similar insurance concerns. BC Finance Minister Carole James has acknowledged the problem and has said the government is looking at ways to address the issue.  However, the Insurance Bureau of Canada asserts that this is a complex issue which will not be solved quickly..4


STATS AT-A-GLANCE


BC UNEMPLOYMENT RATES 5
Regions Rate from Jan 2020 to Feb 2020
Rate from Dec 2019 to Jan 2020
Northern B.C. 10.2% 10.5%
Southern Coastal 7.1% 7.1%
Southern Interior 6.4% 6.2%
Vancouver 4.6% 4.9%
Victoria 4.4% 4.3%

REAL ESTATE ACTIVITY (RESIDENTIAL) BY REGION

Greater Vancouver 6

  • Units sold: 42.4% increase from January 2019
  • Active listings: 20.3% decrease from January 2019
  • New listings: 20.1% increase from January 2019
  • Benchmark price: $1,008,700.00 (1.2% decrease from January 2019)*

Victoria7

  • Units sold: 24.9% increase from January 2019
  • Active listings: 4.8% decrease from January 2019
  • Benchmark price: $858,500.00 (1.4% increase from January 2019 for detached homes)*

Fraser Valley8

  • Units sold: 24.2% increase from January 2019
  • Active listings: 14.2% decrease from January 2019
  • New listings: 15.1% decrease from January 2019
  • Benchmark price: $960,800.00 (0.7% increase from January 2019 for detached homes)*

Okanagan/Shuswap/Revelstoke9

  • Units sold: 14.44% increase from January 2019
  • Active listings: 4.67% decrease from January 2019
  • New listings: 15.32% decrease from January 2019
  • Average residential price: $570,151.00 (11.27% increase from January 2019)

Northern BC10

  • Units sold: 10.3% decrease from January 2019
  • Active listings: 1.0% increase January 2019
  • New listings: 0.2% decrease from January 2019
  • Average residential price: $305,188.00 (6.4% increase from January 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://business.financialpost.com/news/fp-street/focus-on-housing-supply-not-the-mortgage-stress-test-says-scotiabank-ceo
  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/december-2019.html
  7. https://www.vreb.org/current-statistics
  8. http://fvreb.bc.ca/statistics/Package202001.pdf
  9. https://www.omreb.com/files/01-CO%20Statistics-Jan2020.pdf
  10. http://www.bcnreb.bc.ca/creastats

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