The housing market in Metro Vancouver will experience an uptick over the next two years, according to Canada Mortgage Housing and Corporation’s (CMHC) newest interim forecast.
Market conditions are expected to become more balanced through 2021, growing modestly in line with the region’s population growth.
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In 2020, CMHC is forecasting between 22,500 and 24,800 units of housing starts, with up to 3,700 units as single-detached homes and as many as 21,000 units of multi-family homes. Between 30,400 and 35,400 homes will be sold within an average price range from $889,000 to $983,000 next year.
Condominiums and townhomes with prices less than $700,000 will see the greatest demand, given that this price range is accessible to buyers making a purchase based on their income compared to properties that require significant equity for a down payment.
The combination of resale market home price stabilization and a record number of new units currently under construction since 2017 will maintain a level of housing activity above the 10-year average.
During the first eight months of 2019, multi-family homes accounted for 88% of unit starts, and this share is expected to increase with continued densification across the region and the growing shortage of developable land for single-family homes.
The region’s housing market is buoyed by economic and consumer confidence from a low employment rate of 4.6%, as of August 2019, making it amongst the lowest of large urban areas in the country. The region is also forecast to remain close to “full employment,” with the job vacancy rate hovering at 4.8% this past spring.
“The market has more recently started to find its footing, aided in part by continued population growth and lower home prices compared with the same period a year ago. Market participants have adapted their home price growth expectations in light of rising mortgage rates and policy changes from all levels of government since the market highs of 2015-2017, contributing to the normalization of market activity,” reads CMHC’s report released today.
“Mortgage qualification rules will limit the borrowing capacity of some home buyers, which will in turn limit price growth; however, in light of recent financial market conditions, the availability of greater discounts on mortgage interest rates will help mortgage holders realize lower carrying costs, lending some additional support to the housing market.”
But the report warns the rebound trend could be softened if interest rates increase more quickly than anticipated.
At the same time, there could be a moderation in the volume of new construction as projected inventories of unsold units are expected to rise. Rising cost of materials and labour for construction could play as additional factors, restraining the feasibility of some new developments, especially with the labour pool being diverted to large transportation infrastructure projects.
When it comes to the rental housing market, demand is anticipated to remain high over the coming years, leading to continued low vacancy rates and rising rents.
“[Rental] demand will be underpinned by positive net migration and sustained challenges with ownership housing affordability for many households despite lower home prices,” states the report.
“With the rental market expected to remain tight across the region, average rents will continue increasing faster than inflation. The increasing share of new, typically more expensive, rental units in the market as well as rents for existing units rising to market levels with the turnover of long-term tenants will also contribute to higher average rent levels.”
By the end of the summer, there were 6,822 purpose-built rental apartments under construction in the region. The vacancy rate should increase slightly as these units reach completion over the next two years, but CMHC warns these new supply volumes will be insufficient to bring the vacancy rate out of the low in absolute terms.