The strong economy continues to support the housing market in British Columbia but things may be less buoyant over the next two years.
The latest forecast from the BC Real Estate Association calls for a 9% decline in home sales in 2018 to 94,200 units with little change in 2019 (down 0.2%).
While this is still above the 10-year average of 84,800 units, there are some significant headwinds for the market.
“Rising mortgage interest rates will further erode affordability and purchasing power, with the effect being exacerbated by an already high price level,” notes Cameron Muir, BCREA Chief Economist. “The legacy of tougher mortgage qualifications for conventional mortgagors will be a reduction of their purchasing power by up to 20%, and the provincial government’s expansion of the foreign buyer tax and several other policies aimed at taxing wealth is sending a negative signal to the market and likely diverting investment elsewhere.”
Despite potential headwinds, a rise in completions and slowing sales will lead to a balanced BC housing market this year.
And while the next two years are expected to see slower economic and housing growth, the longer-term outlook for the province’s housing market remains strong.
“Demographics will play a key role in the housing market over the next few years,” added Muir, “as growth in the adult-aged population is bolstered by immigration and the massive millennial generation enters its household forming years.”