Trends Impacting Vancouver Housing Market 2013
GDP growth still supportive
The economic outlook has weakened slightly since the 2012 Third Quarter Housing Market Outlook, reflectingÂ slight downward revisions to Canadian GDP growth in 2012 and 2013.
In accordance with the consensus among prominent Canadian economic forecasters, growth in gross domestic product (GDP) is forecast to be 2.0 per cent in 2012 and 2.1 per cent in 2013.
Employment gains will also be supportive
Based on consensus, employment is forecast to increase by 1.1 per cent in 2012, strengthening to 1.9 per cent in 2013. The unemployment rate is expected to decrease from 7.4 per cent in 2011 and stabilize at 7.3 per cent in 2012 and 2013.
Employment gains in 2013 are expected to be above-average only in British Columbia (2.4 per cent) and Alberta (2.2 per cent). All other provinces will see lower employment gains, ranging from 0.5 per cent in New Brunswick to 1.5 per cent inÂ QuÃ©bec.
With employment forecast to expand, this will help to underpin Canadaâ€™s housing market as employment growth encourages people to form and sustain new households.
Higher net migration
Total net migration (net international migration including non-permanent residents) will increase to 264,200 in 2012 before rising slightly to 264,700 in 2013, compared to a tally of 243,824 in 2011. Higher levels of net migration will help supportÂ Canadaâ€™s housing sector. Ontario,Â British Columbia and Alberta will seeÂ the largest gains, further supporting
housing in these regions. Additionally,Â new migrants typically enter theÂ rental market before moving toÂ homeownership. This is expectedÂ to be supportive of demand forÂ purpose-built rental apartments andÂ rental condominium units over theÂ projection horizon.
Mortgage rates to remain low
Although there is significant uncertainty, mortgage rates are not expected to change in 2012. SlightÂ increases are expected in 2013, but rates will remain low by historical standards.
According to CMHCâ€™s base caseÂ scenario, for 2012, the one-yearÂ mortgage rate is forecast to be withinÂ 2.75 per cent to 3.50 per cent. ForÂ 2013, the one-year posted mortgageÂ rate is expected to rise and be in theÂ 3.00 per cent to 4.00 per cent range,Â while the five-year posted mortgageÂ rate is forecast to be within 5.00 perÂ cent to 5.75 per cent, consistent withÂ higher employment and economicÂ growth prospects in 2013.
Low vacancy rates, especially in key markets
According to CMHCâ€™s Fall 2011Â Rental Market Report, the average national vacancy rate declined across all Census Metropolitan Areas (CMAs) to 2.2 per cent in October 2011 from 2.6 per cent a year earlier. Vacancy rates remained below historical averages in centres with high levels of observed multiple starts activity, including MontrÃ©al (at 2.5 per cent in October 2011, below the 1988-2011 average of 3.8 per cent), Toronto (at 1.4 per cent below the historical
average of 1.8 per cent) and Calgary (at 1.9 per cent compared to a historical average of 2.7 per cent). Vancouver was at its historical average of 1.4 per cent in October 2011.
Vacancy rates have remained low inÂ 2012, according to the Spring 2012Â rental market survey. Vacancy ratesÂ are expected to hold steady at 2.2 perÂ cent in October 2012 before decliningÂ to 2.0 per cent in October 2013,Â reflecting expectations of modestÂ purpose-built rental constructionÂ and strong rental demand from highÂ immigration. MontrÃ©al and Calgary are expected to see lower vacancy ratesÂ in 2013, while Vancouver is expectedÂ to again see a rate of 1.4 per cent.Â Torontoâ€™s vacancy rate is expected toÂ decline in 2012 before returning to aÂ level slightly below the 2011 level inÂ 2013.
Inventory near historical average
The quarterly number of total completed and unoccupied housing units per 10,000 population stood at 5.5 units in the third quarterÂ of 2012, close to its 1982 to 2012Â historical average. The compositionÂ of inventories has shifted away from single-and semi-detached units towardÂ row and apartment units, consistentÂ with the trend towards higher-densityÂ land use in Canadaâ€™s larger urbanÂ centres.
Inventories were below local historical averages in most metropolitan centres in the third quarter of 2012, including Toronto, Calgary, MontrÃ©al and Ottawa. On the other hand, Vancouver saw an increase in total inventories per 10,000 population in the third quarter to 15.1 units, above its long run average of 14.2 units.
Since current inventory levels are in line with historical experience, the recent monthly levels of housing starts are not unsustainable in the short run.Â However, new construction activityÂ is expected to moderate over theÂ projection horizon as builders areÂ expected to manage inventories so asÂ to avoid the emergence of historicallyÂ atypical levels.
If you have any real estate questions or if you are thinking of buying or selling your home, please contactÂ James Louie Chung, Greater Vancouver REALTORÂ® â€” Real Estate AgentÂ atÂ [email protected]Â or call / text ( 6 0 4 ) 7 1 9 â€” 6 3 2 8 today!