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Housing demand in 2013 transitioned from a cyclical low at the start of the year to a level that mirrored the ten-year average by the fourth quarter. The market absorbed the impact of tighter credit regulations introduced in 2012, though it took several months to shed the impact on unit sales. However, relatively weak economic growth is now impacting demand.
The BC economy is estimated to have expanded by just 1.6 per cent in 2013, the second consecutive year of relatively tepid growth. For the housing market, related employment is especially important. Total employment in the province pulled back by 0.2 per cent last year, while the Vancouver CMA lost 1,100 jobs. This meant that the marked rise in consumer demand during the first three quarters of the year wasn’t going to be sustained until employment growth regained upward momentum.
Foreign buyers remained on the radar in 2013. A litany of conjecture around their impact continues to play out in the media, in the blogosphere and around water coolers. While the data is spotty, there is little evidence that foreign investors comprise much more than 2 to 4 per cent of residential transactions though, anecdotally, perhaps a little more in some new developments. In addition, the investor class immigrant received much more attention than their market impact suggested.
The demise of the investor immigrant program created a stampede of speculation around the impact on the housing market. News stories about a 45k person backlog led many to exaggerate the significance of the program. The year with the highest level of investor class immigrants that landed in BC was in 2008, when over 5,800 took up residence in the province. By 2012, their numbers had declined to a little more than 2,600, which includes spouses and children.
The number of investor immigrant households that were formed was less than 1,000. Since no noticeable market impact occurred between 2008 and 2012 when their numbers declined by more than 50 per cent, it is unlikely that any market impact will be noticed with the program’s elimination.
Looking forward, consumer demand will likely be constrained by the spillover effect of last year’s weak job market. However, stronger economic conditions are expected to prevail this year. Global economic growth is forecast to increase from 2.9 to 3.9 per cent in 2014, generating rising demand for BC products and services. GDP growth in the province is also expected to increase to 2.4 per cent and, along with an associated rise in employment growth, consumer demand for housing should begin advancing once again in the second half of the year. Look for home sales to increase a little over 6 per cent this year to about 31,000 units.
vancityrealtor 