Key Factors and their Effects on Vancouver Housing Market Activity 2013
Trends at a Glance
Short-term mortgage rates and variable mortgage rates are expected to remain near historically low levels, which will help support housing demand. The outlook’s base case also assumes that mortgage rates will remain flat in 2012 and rise modestly in 2013.
In the 12 months to September 2012, employment grew by 1.0 per cent (+174,500), while the unemployment rate stood at 7.4 per cent. Over this period, full-time employment rose 1.1 per cent (+156,800), and part-time rose 0.5 per cent (+17,700). Employment is forecast to grow 1.1 per cent in 2012 and 1.9 per cent in 2013, which will support Canada’s housing sector.
Growth in incomes is expected to continue, albeit at a moderate pace due to modest economic growth in Canada and global markets. As a result, income will grow slowly in 2012 and 2013, but still will support housing demand.
Relative to those of other countries, Canada’s economy is expected to continue to perform well. Canada is thus expected to attract more immigrants (net international migration), which will push net migration up and positively impact housing demand in the medium to long term.
Canada’s low birth rate should lessen the demand for additional housing stock in the medium and longer term. Population aging, however, will impact the type and tenure of housing demanded.
Resale market conditions for 2012 and 2013 are expected to be balanced in most local markets. As a result, the average MLS® price is expected to grow at a rate close to inflation, or slightly below, for the rest of 2012 and through 2013 in most regions. In addition, housing starts are expected to reflect recent moderation in MLS® sales, as trends in activity on the resale market typically lead trends in new home construction.
Vacancy rates across Canada’s metropolitan centres are expected to hold steady at 2.2 per cent in 2012 before declining to 2.0 per cent in 2013, reflecting expectations of modest purpose-built rental construction and strong rental demand due to high immigration. Low vacancy rates are expected to help support the multiple starts housing segment, through expansion of the
rented condominium market.
Stock of New and Unoccupied Units
The stock of unoccupied new housing units has been stable in 2012, indicating continued strength in demand for newly completed homes. In addition, the ratio of the stock of unoccupied new units to population, a simple gauge to assess potential over-building, is close to the historical average. Should the inventory increase inordinately, builders may delay or reduce the size of some housing projects. This could lead to a sharper-than-expected moderation.
Changes to Mortage Insurance Rules
The recent measures for government-backed mortgage insurance will help ensure the sustainability of housing market activity and help stabilize house price growth. New measures announced for government-backed mortgage insurance will moderate housing activity. Some potential buyers will have to save a larger down payment to offset shorter amortization periods and thus postpone their purchase or consider a less expensive home.
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