The following is a summary of data highlights and anecdotes gathered during my attendance at the 19th annual CMHC Housing Outlook conference this past Friday Nov 1st.
Both variable and fixed interest rates are expected to remain low for the next year or two, possibly much longer. Something I have touched on more than once over the past months.
Population & Employment
The two largest segments of the population in British Columbia are aged 50 to 54 and aged 20 to 24. This combination of young, first-time buyers, coupled with boomers both able to assist those young, first-time buyers, as well as possibly looking at downsizing themselves, should maintain demand for condos. However as many of the people moving into those condos are single occupants, pet-friendly buildings tend to carry a price premium. We human beings do enjoy having some sort of companion.
Population growth in British Columbia is at 0.9%. in the first half 2013 BC added;
- net international immigration 21,075
- net interprovincial migration -2,869
- natural net increase 4,872
- Total increase for Jan-June 2013 23,078
After a slight decline in 2013, employment is forecast to increase once again in 2014. Although it should be noted that the 2013 numbers primarily show a decline in part-time, ‘goods sector’, and private employer jobs which are offset significantly by increases in full-time positions, ‘service sector’, and both self-employment as well as Government employment.
In other words, although the raw data for 2013 may not look great, dig a little deeper and there is a good news story there for many.
Employment growth in the Kootenay region is head and shoulders above all regions of BC with an approx +7% increase, as opposed to Vancouvers decline of less than 0.50%.
Watch for real estate values to follow the same trend. Significant increase in the Kootenay for instance, with little change in Vancouver.
Formation of new households (families) has outpaced actual housing starts (construction) over the past year, a trend that is projected to continue through 2014. The current forecast is 27,900 housing starts and 31,500 household formations.
If the pace of families formed continues ahead of that of new homes built this will translate into an increase in demand and a corresponding decrease of supply – which tends to drive prices upward. Perhaps not an overly significant factor, but certainly one that strengthens the market.
As far as the current ratio of properties listed for sale against actual transactions; we are trending away from a buyers market and closer to a sellers market. However, currently we remain in what is described as a ‘balanced’ market.
The Fraser Valley represents 20% of resale activity in BC. This market is soft for town-homes softer still for condoes. Instead it is all about the detached home with 55 to 60% of Fraser Valley sales detached homes at an average price of $611,281.
In contrast, the average detached home sale price in Vancouver is currently $1,182,244.
Moving over to the tri-cities we see that 80% of housing growth from 2003 – 2013 occurred in this part of the lower mainland. The number of new homes closely matched the number of new households formed. As such the supply aligned quite closely with demand over the past decade.
Within the lower mainland in general detached homes accounted for 50% of all sales in 2003, this dropped to a low of 35% in 2009, rising somewhat in 2013 with detached homes currently accounting for 42% of all sales.
Price appreciation since 2010 has largely been a detached home story; with Port Moody at 8% price growth outpacing Vancouver proper’s 7%. Condos and townhomes throughout the lower mainland have largely been neutral over the past three years, with subtle price changes either way.
Total un-absorbed condos in the lower mainland represent just 2.3 months supply or 1,698 units. This inventory is spread evenly across the lower mainland with the exception of West Van at Zero units.
As for the 14,138 condominiums under construction at this time? Once again the statistics for new household formation suggest future supply will be mostly aligned with demand, keeping prices stable.
Vacancy rates remain below 2% in Vancouver, while approaching 5% in the Fraser Valley.
The creation of rental property stock in BC is an interesting story. Although purpose built rental starts in Vancouver are at near double the 10 year average for 2013 at 987 units, on a per capita basis supply of dedicated stock has dropped 17% over the past 10 years.
Of the ~ 257,375 rental suites currently in Vancouver 59% are individual-investor owned while only 41% were purpose built rental buildings. If you are renting from a private individual, thank them, for without them supply would be far more limited. We know what happens to price when supply dwindles.
As far as new units, from Oct/2011 through Oct/2012 approx 6,036 new rental properties came on the market and were quickly absorbed. 94% of them investor-owned, just 6% were purpose built. (again, hug your landlord if you have one)
Much was made of statistics reported in mainstream media surrounding the Vancouver market. There were some clever examples of the dangers of using averages, which ultimately singled out certain neighborhoods in West side Vancouver whose house prices and sales activity have a disproportionate impact on the overall numbers reported.
There was also much made of the media’s reporting of significant increases, ‘bounce-backs’, in the Vancouver market based on year-over-year statistics. After all it is easy to have a big gain when you’re measuring against one of the worst years or months in the past decade.
In other words, take all stats, %’s, numbers in general, with a grain of salt. The ones in this post included.
A single statistic, even a large set of numbers, rarely tells the whole story. It brings me back to an analogy I often use about the yo-yo on an escalator.
Lots of short staccato movement, but one long general trend.
Thanks for your time.