2014 has been a very strong year for Real Estate activity and sales for both the Commercial and Residential sectors in the Greater Vancouver market, and throughout B.C. generally. Furthermore, this strength is predicted to extend through 2015 and beyond.
Commercial Real Estate strength is measured by the BC Real Estate Association’s “Commercial Leading Indicator” (CLI) which was designed to forecast changes in broad Commercial Real Estate activity.
The CLI does this by recording and measuring changes in economic variables and changes in employment and other business cycle indicators, as well as monitoring indicators from the financial markets that could signal turning points in the Commercial Real Estate market. The BC economy grew approximately 2.3% in 2014, led by key Commercial Real Estate sectors such as retail and manufacturing. The latest CLI rose 1.4 index points to a record high of 118.4, surpassing the previous high of 117.1 set in the second quarter of 2014 & has now advanced for seven consecutive quarters. That trend signals significant strength in the economic environment underlying the Commercial Real Estate market, and points to growth in investment, leasing & other Commercial Real Estate activity two to four quarters ahead. Given the current trend, growth in the Commercial Real Estate market is expected to continue through the first half of 2015.
Residential Real Estate also had an extremely positive 2014, and that trend is expected to continue, according to both BCREA and CMHC.
BCREA Chief Economist Cameron Muir reports that “Consumer demand has ratcheted up in 2014 and is expected to remain at a more elevated level through 2015. While historically low mortgage rates support demand, the housing market is also being underpinned by a more robust economy and associated job growth, strong net migration and consumer confidence." BC Multiple Listing Service® (MLS®) residential sales increased 15.1% to 83,900 units in 2014, and are forecast to edge up a further 1.2% to 84,900 units in 2015. The average MLS® residential price for the province increased 6% to a record $569,800 in 2014 and is forecast to increase a further 1.2% to $574,300 in 2015. MLS sales records and data indicates that foreign buyers make up approximately 3% of home sales in any given month.
So the robust sales figures are indicative of a very strong demand from domestic, local buyers. The overall message from Canada Mortgage and Housing Corporation’s 2014 Housing Outlook Conference held November 4th 2014 in Vancouver, echoed the BCREA’s forecast, and predicted that the real estate market in British Columbia, and specifically in the Lower Mainland, will remain strong and steady into 2016.
CMHC cited several reasons for this:
- Canada’s economy will continue to improve, and attract immigrants and new residents to BC.
- No interest or mortgage rate increases are expected until late in 2015.
- Shifting demographics will see more senior households and single owners, leading to more renovation activity (and jobs), keep detached resales buoyant, and keep the demand for new condos and townhomes high.
Housing Affordability - Steady Supply
Keynote speaker Bob Rennie weighed in on the affordability issue. When you factor out the top 20% of sales, he said, average prices become much more reasonable, so that, the average price of a detached home drops from the $1M range to around $670,000, while condos drop to $316,000. He also stressed the need to assess zoning policies to create more opportunities for density. Today’s buyers are attracted to ‘energy centers’ where amenities like shopping, transit and schools are easily accessible. Keeping this supply steady while an estimate 40,000 new residents move to BC each year is key to keeping affordability in check. “Because without supply, there’s no cure for affordability,” said Rennie.
All of this is good news for property owners and investors - both current and future - as the Lower Mainland Real Estate will continue to offer opportunities for Buyers and Sellers alike. Steady and increasing demand for housing and commercial enterprises alike will spur development and encourage zoning authorities to consider innovation and expansion of housing options.
This is already happening in Vancouver where new, medium to high density market rental housing developments are being approved and built along transportation corridors, in areas that were formerly single family or duplex zoned. There is also some hope and push from both the development industry and from affected neighbourhoods to also see more encouragement of ground oriented townhouse style developments to meet the space and affordability needs of families.
If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please call Bob Bracken at 604-220-2035 or 604-263-2823.
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