British Columbia's housing market has gotten a shot in the arm by the growing population, cheaper borrowing costs, and increasing dwelling demand, resulting in a faster-than-expected recovery in sales and prices, according to an analysis by Central 1.
The province's steady economic growth and improving affordability have boosted the demand from would-be buyers, particularly in areas such as the Lower Mainland.
"Home sales have returned to more normal levels following over a year of policy-induced declines but BC's sales recovery has lagged the rest of Canada," said Central 1 deputy chief economist Bryan Yu.
The Lower Mainland region was hit the hardest during the 2018 housing downturn. The significant price declines in the area have sparked interest from buyers, particularly in the lower-priced condominium sector.
Yu said the Lower Mainland's sales growth momentum would likely continue into 2020.
Overall, Yu said provincial resale transactions would decline by 7% this year, followed by a sharp turnaround of 13% gains in 2020. In 2021, resale activity would likely grow further by 4%.
"This reflects growth in the economy, population, federal programs to support first home purchases and persistence of low borrowing costs. However, we do not anticipate sales to recover to 2017 levels, when resale transactions were just shy of 100,000 units," he said.
BC's current median home value sits at $522,000, representing a 2.4% decline from last year. Under Central 1's projections, median home values could rise by 3.8% in 2020 and by 4% in 2021 to $568,000.
"Metro Vancouver will lead this increase, which will undoubtedly bring affordability challenges back into the spotlight," Yu said.
In terms of housing starts, however, Central 1 expects a 16% decline. This could be attributed to the sluggish pre-sales this year, which would delay constructions from 2020 onwards. This could put more pressure on house prices and rent, as the population growth over the next years would likely push demand.
"Homeownership remains out of reach for many households. Decades of insufficient construction of purpose-built rental building, rising price trends over the past 10 years and a growing population and economy continue to underpin a tight rental market despite rising rental construction trends in recent years," Yu said.