B.C. real estate: home prices forecast to rise 7.7 percent by end of 2020, and 3.7 percent in 2021

B.C. realtors expect not only to sell more homes this year and the next compared to 2019.

They also anticipate prices to rise in 2020 and 2021. The B.C. Real Estate Association predicts 2020 to finish with a 7.7 percent increase in average price over 2019. The BCREA also forecasts a further increase of 3.7 percent in 2021.

In Greater Vancouver, the association anticipates the average price to jump 5.9 percent over 2019. For 2021, the average price in the region is predicted to rise 2.4 percent. In the Fraser Valley, the BCREA expects the average price to grow 6.7 percent in 2020, and 2.6 percent in 2021.

It can be recalled that the Canada Mortgage and Housing Corporation thinks otherwise. On June 4, 2020, CMHC predicted a nine to 18 percent decline in average home prices in the country over the next year. The federal housing agency reiterated its dim outlook a few weeks later on June 23. That was when CMHC released its outlook report for the summer market.

“House prices will likely fall because of uncertainty over the economy’s path,” the agency stated particularly for major urban centres. Unlike the CMHC, the BCREA has rosy prospects, which it laid out in its third quarter housing forecast Tuesday (August 25). In terms of sales, the association predicts 82,380 transactions in 2020, representing a 6.5 percent increase over 2020.

In 2021, the BCREA forecasts sales to rise to 96,860, for a further 17.6 percent increase.

According to the association, a “recovering economy and low mortgage rates” will “drive demand”. The BCREA noted that market activity has been strong amid the ongoing COVID-19 pandemic. While sales “initially fell to historic lows in April”, the association noted that the market later “soared, more than regaining pre-pandemic levels”.

The same phenomenon happened in the rest of the country.

The Canadian Real Estate Association recently reported that the residential market set a new record in July 2020. The CREA reported that sales last month “posted the highest level of any month in history”.

According to the national association, a total of 62,355 transactions happened in July 2020, marking the "highest monthly sales figure on record going back more than 40 years". In its third quarter housing forecast, the BCREA noted that the recession caused by the pandemic is “on pace to be one of the worst on record” for the province. “However, looking at recent data in the housing market, it would be difficult to tell there was a recession at all,” the association stated. The BCREA pointed out that the “explanation for the counter-intuitive performance of the housing market lies in the very unusual characteristics of the COVID-19 recession”. “Unlike in a typical recession, many of the job losses have been felt in lower-wage, frontline service sector jobs, typically held by younger workers,” the association stated. “Meanwhile,” the BCREA continued, “higher-wage sectors that tend to drive the ownership market have seen employment levels fully recover.”

“As a result, sales activity has spiked as record-low mortgage rates unleashed a wave of pent-up demand previously sidelined by the pandemic,” the association explained.

Undeterred by predictions of falling prices, home construction in Canada jumps to new high

Canada Mortgage and Housing Corporation said it more than once. Home prices will fall, according to the national housing agency.

Developers and builders are unfazed. They’re building away. RBC Economics reports that new homebuilding in Canada grew again in July 2020. A total of 246,000 homes started construction last month, the “strongest” in two-and-a-half years, and 11 percent “above year-ago levels”. The report prepared by RBC economist Claire Fan came out Tuesday (August 11).

Condos and other multi-unit homes led the growth in new home construction, accounting for 75 percent. Multi-unit starts totaled 184,000 in July 2020. New home construction in July 2020 surpassed the 212,000 housing starts in June. Homebuilding hit a low of 165,000 in April because of the COVID-19 pandemic. In a previous report, Fang noted that “even the lowpoint in April wasn’t as big a decline”. In May 2020, new home construction bounced back with 196,000 units.

CMHC has been saying that average home prices will drop nine to 18 percent.

In the August 11 report, Fang also noted that more and stronger homebuilding activity is expected in the coming period. Fang likewise reported that real estate boards in major urban centres like Vancouver, Toronto and Calgary are indicating sale increases in July. “There are still plenty of downside risks for the housing markets outlook,” Fang wrote. The RBC economist noted that “overall labour market is still weak”. Also, “lower immigration flows also mean less demand for new supply of housing”.

“But, for now, both new building activity and home resales have shown stronger trends than feared,” Fang wrote.