BC has experienced balanced housing market conditions for over a year, and can expect to see more of the same in 2012, according to CMHC’s BC regional economist Carol Frketich and senior market analyst Robyn Adamache. Frketich and Adamache spoke at the CMHC Housing Outlook Conference in Vancouver, November 16.
One of the interesting things right now, Frketich said, is that we’ve continued to see price increases despite the fact we’re in a balanced market. In terms of market shifts, however, there’s usually a five to seven month lag time before prices change.
According to CMHC, BC home sales are forecast to hit 77,200 in 2011 and 81,900 in 2012, with BC housing starts expected to be 28,500 next year. In our Board area, sales are expected to increase by nine percent from a forecast of 33,000 sales in 2011 to 36,000 sales in 2012. CMHC also expects housing prices to increase next year at the rate of inflation.
In terms of factors affecting the housing market, here are CMHC’s predictions for 2012:
· Interest rates will remain stable and low: 5.2 to 5.7 per cent expected long-term rates, and 3.4 to 3.8 per cent expected short-term rates.
· China’s economic growth is expected to slow down, BC’s economic growth to slightly increase, and Canada’s to slightly slow down in 2012.
· CMHC sees slower growth in the US next year, but they’re not predicting a recession.
· BC is well-positioned to benefit from global trade, with trade patterns having shifted considerably away from the US since 2001, and much more trade with China, Korea and other Asian countries.
· Consumer pull-back slows growth this year, but comes back in 2012. Consumer spending is expected to improve.
· Retail sales are up marginally, by about one percent in BC, but lower in Vancouver.
· More stability and more jobs expected for northern BC resource centres. In Vancouver, employment is up four per cent over the last peak. The rest of the province is much lower or declining.
· The province saw 40,000 new jobs in September, and held on to those gains in October.
· BC businesses are seeing an increase in corporate profits. Expect planned investment to increase.
· Alberta is leading the country in job growth, but will slow more in line with BC going forward. The West will lead in GDP growth in Canada next year: BC at 2.7 per cent and Alberta at 3.5 per cent.
· Vancouver will account for the lion’s share of new home construction in the province in 2012. Multiple-family construction will account for the largest share.
Migration continues to affect growth in the province. Household formation – which includes children growing up and forming their own households and people moving to BC – is forecast to pick up slightly in 2012.
Typically, 34,000 new households form in the province each year. According to CMHC research, within six months of arrival 17 percent of new immigrants are homeowners. At four years, more than half of new Canadians are homeowners.
Immigrant investors bring $1.6 million in personal wealth, and make an $800,000 initial investment. Of investor immigrants, 70 per cent come here from China and 14 percent from Taiwan. Just under half of all investor immigrants in Canada land in BC.
Vancouver attracts younger people, with the majority of immigrants in the 18 to 24 year-old and 25 to 44 year-old groups. Younger people are likely to create demand for a stronger rental market. BC also tends to gain from Ontario and Alberta in migration, with people from Ontario showing a preference to live in Vancouver.