Vancouver’s Housing Market Predictions

  • A Globe and Mail article caught our eye recently: the future of Vancouver’s real estate market and what it means for you. Helmut Pastrick, the local chief economist for Central 1 Credit Union which represents all the credit unions in B.C., predicts that double-digit price increases will continue for only the next 3 – 6 more months and then slow to single digit increases for the next decade and beyond. Five years ago, most of my clients who were looking for a house in East Vancouver wanted something west of Knight St. Now, homes east of Knight St. are over $1million (lot value is $900,000) and the expectation of where people will live has shifted east. The most affordable area is Surrey, but many want to avoid the bridge or long transit commute. So, this puts pressure on the areas west of the Port Mann bridge which are all part of the hub of Vancouver. The lower mainland is expected to have 1 million more people by 2040 due to the robust and diverse economy here. Job growth in the lower mainland is strong and of a wide range. As we grow, there will be more people needing a variety of housing options. Many of these people will move up the job ladder or have kids and therefore will need bigger spaces. Other trends in the lower mainland are seeing baby boomers stay in their large homes longer and helping out their kids with a down payment for a condo and first-time home buyers who are buying condos, not houses. The two most common types of condo buyers are Generation Y and local investors. Gen Y (20-35) are often car-free, choosing to be close to transit and are happy with a small unit, 500 square feet or so, as long as it has the modern amenities and fixtures. The other common new construction condo purchaser is a local home owner using equity from their home to purchase a long term investment and rent it out; an attractive option as vacancy rates are below 2% and rent’s on the rise. Price increases are very supply-and-demand-driven, but the real estate market needs to move on all levels to sustain the gains. 2015 saw a resurgence in the condo market in both price gains and activity. I believe a fundamental factor of this was the drop in interest rates in early 2015 that gave people the confidence that rates won’t be climbing quickly soon again. In fact, Mr. Pastrick has predicted that there won’t be a rate increase until 2017. So that has signalled to buyers that they can stretch a little out of their comfort zone knowing that their mortgage payment won’t change much at the variable rate, if at all for 5 years at the fixed rate to 2.69%. High rental rates coupled with low interest rates has many young people getting in to the market because their rent is similar to what their mortgage payment will be. Vancouver’s amazing geography, weather, and Top 5 world ranking since the Olympics continues to put pressure on housing. I challenge you to drive more than 5 minutes on a major street in Vancouver and not spot a construction crane! Personally, I can’t imagine an additional 1 million people living here, but I understand the draw. We are fortunate to call Vancouver home and enjoy one of the best cities in the world. It also explains the confidence of developers to build all the new condo towers, duplexes, and single family homes. New housing going up is a good sign of the strength of our economy. Please click here to read the full article and let me know your thoughts. My best to you, Doug Gibson Team Kerr (Photo: Alex Costin)

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