While a slight upswing in the Lower Mainland’s housing market is, without a doubt, good news, a Central 1 Credit Union report suggests tapered expectations.
“We’ve started to see a bottoming in the Lower Mainland area; sales hit a bottom in the spring and summer months, but now we’re seeing a moderate bounce back,” said Bryan Yu, Central 1’s deputy chief economist. “The latest numbers from CREA [Canadian Real Estate Association] suggest there was a nice increase in July, but levels are still around 2014 levels. To keep it in context, sales are on the upswing and the labour market is helping with that.”
The rebound, however ephemeral it could be, also indicates buyers have adjusted to the realities of B-20 as well as other measures brought in by the British Columbia government. Lower Mainland price points have been declining over recent months, a trend that has slowed, but Yu says the bottom has not yet been reached.
“The change in mortgage rates and what people are receiving in the market now are a big lift for affordability, provided they meet B-20’s restraints,” he said. “A 2.8% on a five-year fixed mortgage is a 50 basis point drop from late 2018, so the numbers favour buyers. When we combine those factors we’re seeing relative affordability.”
Alex McFadyen, a broker with DLC Canadian Mortgage Experts, noticed fewer listings in Metro Vancouver through most of 2019, but says that’s changed of late.
“Now we’re seeing product move again, and there’s more optimism in the marketplace. Sellers are being flexible with their price points and that’s helped things in the market pick up,” he said. “Market conditions seem very healthy right now—there’s buyer interest and seller flexibility—because there’s stability. I think after 2018 and the first half of 2019, people were exhausted.”
Central 1’s report made mention of “recession-like conditions” in the resale market beginning in 2018, and Metro Vancouver—where sales are trending at 2012 levels and prices have fallen 10% below peak levels—has been the correction’s epicentre.
Conversely, construction starts are high, although as a result of the peak sales cycle from two to three years ago.
“Year-to-date growth is over 15% for B.C., a surprisingly strong housing start performance for the first half of the year for the province,” said Yu. “We have to be careful, though, because there’s a lot of volatility when it comes to multifamily starts with big swings that come quickly. Our view is that given the resale and presale slowdowns, we see a drop off in momentum in the back half of 2020.”