VANCOUVER, B.C. — Experts with Central 1, a digital banking and payment products and services company, believe B.C.’s skyrocketing real estate market shows no signs of stopping in 2021, but a cooler environment could be on the horizon.
“Year-over-year sales growth will explode in the coming months following a doubling of MLS home sales observed between March 2020 and March 2021, reflecting record levels of current sales and weakness early in the pandemic period,” said Central 1’s chief economist Brian Yu in a statement. “Elevated sales will persist, but annual sales are forecast to contract by about 21 per cent in 2022, with a further decline of about four per cent in 2023.”
However, Yu cautioned that current trends are unsustainable and a move towards a normal market environment is expected in the second half of the year as the pandemic wanes.
Yu said the B.C. median home value is forecast to rise 10 per cent this year to $643,000, following a 9.3 per cent increase in 2020. Meanwhile, the median provincial price is forecast to grow by 4.2 per cent in 2021 and by 3.0 per cent in 2022.
“Price growth will be broadly stronger outside the largest urban markets due to remote workers purchasing homes outside the cities but is expected to rotate back to urban areas as the pandemic wanes,” Yu said.
He said foreign buyers are not the culprit for housing surges, making up only 1.5 per cent of housing buys. Instead, he attributed the rise to COVID-19.
He explained people working in higher paid sectors of the economy have been able to amass savings for a down payment while working from home and not travelling. The province’s demographics also have a significant number of millennials who have reached an age where many want to buy a home and start a family.
Yu noted government has done little to intervene but believes there is little they could do to address the underlying issues.
“The lack of government intervention may reflect limited tools to temper the market given the surge in activity is driven by domestic buyers who have strong credit and are already subject to a mortgage stress tests,” Yu said, adding, “the primary drivers of the current boom are low borrowing costs and a shift in household pandemic preferences. Both are outside the control of policy-makers and are expected to naturally wane as the pandemic eases.”