Will the market continue its rebound in 2020, or fall prey to a slowdown driven by rising supply? All bets are off
It’s been a whirlwind of a year for the B.C. housing market. Gossip about real estate, often considered British Columbians’ favourite pastime, quieted to a whisper at the start of 2019. Sales volumes reached six-year lows and prices began falling—a rare event for the 68 percent of B.C. residents who own a home, according to Statistics Canada.
But thanks to a slide in mortgage rates and an economy enjoying full employment, the market showed a return to form in the back half of the year, with sales nearing long-term historical averages. The question on everyone’s mind: Will this rally last? What can we expect heading into the new year?
Although I can’t forecast markets with precision, let’s apply some realistic probabilities to scenarios that could affect the outlook for B.C.’s housing market. Employment has been growing at an annualized pace of just over 4 percent, and as of September the provincial jobless rate tied Quebec’s for the lowest in the country. It appears that population growth will hover around historically normal levels and mortgage rates will remain very low, with banks more than willing to lend. If these tailwinds persist, they should help ensure a robust housing market.
But not all good things last forever. A decade into the current economic expansion, there are signs that the market is slowing, mostly due to a pullback of foreign investment, policy changes and indebted households plagued by wages that haven’t kept pace with home prices.
Because housing, construction and related finance account for nearly 25 percent of provincial GDP, the knock-on effects of a slower property market would be felt in the broader economy. There’s a real risk this could translate into job losses—the most significant danger now that the threat of rising interest rates has largely subsided.
There’s one other glaring risk: the record number of new housing units nearing completion. The 12-month sum has ramped up to all-time highs of nearly 40,000, the latest Statcan data show. Throw in a host of housing starts and near-record totals for units under construction, and we’re about to see a ton of new product, which thankfully should ease supply woes. Depending on the state of the labour market, this will help keep prices in check, or push them further down if unemployment and tighter credit weaken housing demand.
It looks like the odds of rising prices next year remain low, given where we are in the real estate cycle, with flagging sector employment and rising supply of new homes. Meanwhile, there’s still considerable risk of sluggish sales and lower prices if the provincial economy can’t shift away from this trend of slowing growth.
The tail wags the dog here in B.C. As housing goes, so does everything else. There will be plenty more to talk about in 2020.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
