VANCOUVER – A dramatic shift is underway in Metro Vancouver’s housing market as costly detached homes become a “luxury product” out of reach for many families, a new forecast reveals.
Central 1 Credit Union predicts that a widening price gap between apartment or condominium units and houses will be “difficult if not impossible to bridge.”
“In previous years the housing ladder meant starting in a condo and transitioning to a detached home. That will no longer be the trend,” said senior economist Bryan Yu in a release.
“For most families the housing ladder will lead from one multi-family unit to another.”
Across British Columbia, home prices and sales will continue to rise for the next two years, the report predicts. Average prices in the province will leap six per cent this year to $425,000, reaching $462,000 by 2017.
Median prices for detached Vancouver-area properties are set to shatter the $1-million mark, fuelled by a lack of land and relentless demand.
Yu said the dearth of supply of detached homes is likely to continue, underpinned by a land base that is hemmed in by the ocean, the coastal mountains, the U.S. border and an agricultural land reserve.
He noted that price momentum in Metro Vancouver has also spilled into the neighbouring Fraser Valley, anchored by Chilliwack and Abbotsford.
In contrast, the Alberta recession, a weak mining sector and few available homes will slow — but not cap — demand in B.C.’s Interior, northern B.C. and the Kootenays.
Dropping oil prices and energy sector layoffs have led to job cuts for some residents in the Interior and northern B.C. who commute to Alberta’s oilsands for employment, Yu said.
“If the market isn’t doing very well (in Alberta), you’re going to see less of that spillover demand for vacation properties or secondary homes in these regions,” he added in an interview.
But parts of the Okanagan Valley, including Kelowna, are seeing rebounding house prices after years of stagnation caused by an over-built market.
“It’s taken a long time for them to get rid of the excess supply,” he said. “Now that we’re seeing inventories fall off in these areas, we basically have much more balanced conditions.”
The financial institution also predicts low mortgage rates will keep sales sizzling. Yu anticipates five-year fixed term rates will remain essentially unchanged through 2016 and will increase marginally to only five per cent by the end of 2017.
Vancouver Island markets, especially Victoria, are also strong as the communities are poised to take advantage of the low Canadian dollar and as over-supply has been sold off, Yu said.
The forecast notes that B.C.’s economic growth is expected to remain among the highest in the country, which will drive gains in employment and personal income. But a mild slowdown in population growth is also expected, caused by weak trends in international immigration.
B.C.’s active housing market — in particular construction, renovation and acquisition-related costs — is expected to lift broader economic growth over the next two years.