2016 BC Housing Market Outlook

The Canada Mortgage and Housing Corporation (CMHC) has released their fourth quarter report on the British Columbia Housing Market Outlook for 2015 and 2016. Here's a quick look at what the report means for real estate in BC in the upcoming year:

Across Canada

Housing activity across the country is expected to remain stable. Oil prices have dropped as of late, affecting Canada's GDP, but employment gains and low interest rates are allowing Canadians to continue to invest in housing.

In 2016 the GDP should begin increasing due to improved manufacturing exports. Exports already began to rebound in mid-2015 and are likely to continue growing into 2017. This, along with increased tourism and lower transportation costs from falling oil prices, is especially expected to benefit BC, and may attract Canadians to BC from other provinces.

New & Existing Home Sales

The number of new house constructions in British Columbia should see a slight increase, while it declines in other provinces (such as Alberta) as a result of falling oil prices. BC's stronger demand for housing is sustained by our non-energy industry sectors benefitting from lower oil prices, lower interest rates, and a lower Canada/US currency exchange rate.

MLS resales in BC are also expected to rise from 2016 to 2017 in both number and price. The total number of resales should range from 82,300 - 102,700 transactions in 2016, and from 74,500 - 104,500 transactions in 2017.

Home sale price averages are predicted to range from $594,500 - $668,000 in 2016, to $577,700 - $699,700 in 2017.

Mortgage Rates In 2016 & 2017

Mortgage rates should hover around their current levels until late 2016, at which point they're expected to rise as the Canadian economy improves. This may cause the housing market to slow down somewhat, offsetting the demand caused by BC employment and population growth.

The mortgage rate range for end-of-year 2015 is expected to be 2.60 - 3.30% for one-year rates, and 4.10 - 5.20% for five-year rates. In 2016, one-year rates are expected to range from 3 - 3.80%, and five-year rates from 4.70 - 6%. In 2017, one-year rates are expected to range from 3.90 - 4.80%, while five-year rates range from 5.10 - 6.50%.

Housing Demand

BC is expected to see a population of growth of just over 1% per year for the next couple of years — mostly from people moving from other countries to the BC mainland, but also from Canadians moving to BC from other provinces. This will add to the demand for real estate rentals and ownership, resulting in more turnover and resale activity.

Vancouver in particular is expected to see an increased share of all higher-priced home sales across BC, as well as a rising share of the total number of BC real estate sales, which in turn could cause an upward swing on average prices provincewide.

The CMHC has also predicted a slight drop in unemployment and a small raise in average hourly earnings by 2017, supporting Canadians' ability to invest in housing.

Market Slowdowns

Canada's population of 25-34 year olds (who form a large percentage of first-time home buyers) is expected to start on a long-term decline by the end of 2017. This is likely to lower the demand on lower-priced multi-unit housing types, which first-time homebuyers tend to favour. Despite this, other demographics are expected to show more interest in multi-unit properties as single-detached homes increase in price, keeping the multi-unit market stable.

Household debt levels remain high throughout the country and continue to pose a risk to the housing market: if the Canadian economy suffers a shock and the countrywide unemployment rate rises significantly, homeowners may need to sell their non-liquid housing assets, flooding the market and forcing housing prices down.

Overall, resale market conditions in the province are projected to remain balanced over the next two years.

Detailed CMHC housing market forecasts for the Vancouver, Abbotsford-Mission, Victoria and Kelowna Census Metropolitan Areas (CMAs) are available in the CMA Fall Housing Market Outlook reports. In addition, forecasts for the cities of Prince George, Kamloops and Nanaimo are available in the Fourth Quarter Housing Market Outlook British Columbia Highlights report.