Increased demand drives B.C. home sales recovery

After starting the year at depressed levels, provincial Multiple Listing Service home sales maintained upward momentum through December.

Seasonally adjusted sales rose 2.5% from November to 7,953 units in December while year-over-year sales jumped 49%. That said, the latter owes in part to weak December 2019 sales, as full-year sales fell 1.5% after a 25% plunge in 2018.

With federal and provincial policies continuing to restrict home ownership, annual sales rose 1.1% in the Lower Mainland-Southwest and dropped close to 5% on the Island and in northern B.C. and Interior markets.

Nevertheless, demand is rising, specifically in the Lower Mainland markets most affected by the policy changes. Households have adapted to federal mortgage stress tests, in part through larger down payments or lowering expectations. Lower prices in markets like the Lower Mainland, mortgage rate cuts, a tight labour market and population growth have also driven a sales rebound.

Other regions in B.C. have experienced more moderate sales growth but were less affected by the policy changes. Provincial sales are forecast to climb 13% this year as they maintain momentum through 2020 due to low interest rates and population growth.

Despite a jump in new rental units hitting the market, challenges for renters remained daunting in 2019. Canada Mortgage and Housing Corp.’s rental vacancy rate estimate for apartments and townhomes in B.C. was a scant 1.5%, up slightly from a 1.4% rate in 2018. Among metro areas, the Vancouver census metropolitan area (CMA) posted a 1.1% rate. 

Strong population flows to large urban areas and constrained ability to get into ownership markets due to higher prices and more stringent federal mortgage stress tests have contributed to some of the tightest markets in Canada.

Average rents in B.C. rose to $1,324 in 2019 from $1,251 in 2018, reflecting a combination of higher rents on new construction and rent inflation. The highest rents were unsurprisingly in the Vancouver CMA at $1,480; Victoria and Kelowna were second at near $1,230. Same-sample rent growth rose 4.2% in 2019 following a 6.3% increase in 2019, but was constrained by rent control measures.

Mild relief is in sight for the market via additional rental supply. At the end of 2019, there were 17,280 rental units under construction in B.C., more than half in the Vancouver CMA. This was 14% above a year ago and triples levels from four years ago, which should alleviate pressure when the units are completed, although demand will continue to rise. •

Bryan Yu is deputy chief economist at Central 1 Credit Union.