Prices for single-family homes up 15 per cent in past year
The most recent sales results fit with Central 1 Credit Union’s latest housing forecast, which estimates that the surprise cut in mortgage rates earlier this year will produce a modest, steady rise in housing demand even as interest rates move higher in coming years.
Central 1 expects the average posted five-year mortgage rate to rise from the current 4.9 per cent to 5.75 per cent through 2017, which will dampen sales somewhat, according to senior economist Bryan Yu, but won’t be enough to overwhelm economic growth and rising prices.
Yu’s estimate is that the median price for a Metro Vancouver detached home this year will hit $820,000, a 15-per-cent increase over last year, and reflects the demand for single-family houses versus condominiums, which have seen more modest gains.
His forecast is for Metro Vancouver prices, on all property types, to rise 5.2 per cent by the end of 2014, 2.5 per cent in 2015, and close to 3.5 per cent for 2016 and 2017.
“In terms of (prices) we should also recognize there is a difference between detached and multi-family,” Yu said, “and it is a really big difference.”
In his forecast, Yu said the difference relates back to the scarcity of developable land in Metro Vancouver, which pushes prices up for single-family homes, and pushes developers to build higher-density condominium projects.
“That will help maintain some of the affordability on the condo side,” he added.
That is the experience of Vancouver realtor Lorne Goldman, who has listed condominiums that have sold for prices below levels three years ago, but single-family homes have increased in value.
Goldman said that foreign demand has influenced sales, but local buyers are also stretching their finances to get into single-family homes.
“There’s been no significant rise in people’s income,” he said. “So you’ve got low mortgage rates, income coming from tenants and the bank of mom and dad. That’s some of what’s fuelling this (market) turnaround.”
Ray Harris, president of the Real Estate Board of Greater Vancouver, said that in June, the competition among buyers “is as strong as it has been in the region since 2011.”
He added that with two months now where overall sales have equalled more than 20 per cent of homes available in the inventory (for June the ratio was 21 per cent), Metro Vancouver is “on the cusp of a seller’s market.”
Yu said the cut in mortgage rates earlier this year, which saw some discounted rates fall below three per cent, was a surprise development and sparked a lot of “fence sitters” to jump into the market. He doesn’t expect the rock-bottom rates to last, but his expectations are for modest increases over the period of his forecast that won’t get ahead of overall economic growth.
“We’re unlikely to see a lot of movement in interest rates before (Canada’s) economic growth kicks in,” Yu said.
For B.C., Yu is hedging that at least two of the multi-billion-dollar liquefied natural gas projects will go ahead, fuelling growth between now and 2017. But he also sees the spate of technology firms moving to or expanding in Metro Vancouver as a positive development that helps the overall economy.
Microsoft, Amazon and Sony Pictures Imageworks are all among the companies that have shown signs they are setting up shop or expanding operations.
And while the overall number of jobs from those moves won’t be enough to give a big boost to housing, Yu said they help create “more of a hub-type of environment” in the technology sector, which typically has higher-paying jobs.
Yu also expects to see B.C. population growth through immigration, which has slowed since 2010, to increase by 2016. And while B.C. “has been on the losing end” of interprovincial migration for the past two years, he forecasts that economic growth should reverse that trend from 2015 through 2017, which will also help support housing growth.