30 Jan 2021 Real Estate Predictions for British Columbia
Nothing prepared Canadians for the COVID-19 pandemic that slipped across our borders in early 2020. B.C. managed to keep numbers relatively lower, even as the year wound down and case numbers in the west soared. However, the real estate market that many soothsayers foretold would suffer drastically, really didn’t feel the impact as imagined. Instead, a sellers’ market emerged with healthy supply in the downtown core supported by lower interest rates.
In fact, Vancouver ended the year with a bang seeing a 53.4% rise in year over year home sales in December. So how do things look for the B.C. real estate market in 2021? We’ve rounded up the top predictions for the year ahead.
Heading for the Hills
Across the country, city dwellers who worried about rubbing elbows with the coronavirus sold their condos in pursuit of a safer life in the suburbs. This not surprisingly was most noted in Toronto and Montreal, the two cities hardest hit by the virus. However, B.C. is experiencing the trend as well, as buyers are leaving Vancouver in pursuit of larger properties and safe, wide-open spaces. It’s not just fear of the virus, however. It is also related to a “side effect” of the virus as more people work from home. No longer are people tied to a downtown condo to be closer to work.
Now, they have the freedom to live anywhere. And by anywhere, it’s not only traditional houses further out in the suburbs people are seeking. It’s also related to what would traditionally sell as vacation homes in remote areas in the interior and island locations. As a result, there will be healthier supplies in the downtown core, leaving opportunities open for buyers still excited about the idea of living in Vancouver proper. As well, larger properties in the suburbs will continue to grow in demand, pushing prices for detached homes higher by about 9%.
Hello, Interest Rates
While interest rates are low, mortgage lenders will become more competitive offering unheard of interest rates to attract more buyers. As the economy begins its recovery from COVID-19, and more people decide they want to purchase a home outside the city, the mover-over market will help drive sales in the suburbs.
Although mortgage rates will be competitive for the first quarter, chances are as the economy evens out, rates most likely will begin to turn upwards by mid-year. So, now is the time for buyers to take that first step on the real estate ladder as the rock bottom interest rates aren’t likely to last beyond the early summer.
Condos Will Make a Comeback
Keeping in mind that condos remain the most affordable option for first time buyers, sales continue to attract those anxious to own a home. However, for now, the condos outside the city are the more popular choice. The attraction of urban life will return once the pandemic peters out with the arrival of the vaccine. However, the gains in pricing here will be much lower than the average detached home with the condo median price to increase by only about 3.5% for 2021.
The Rental Market
Let’s also not forget that with the vaccine, population increases from students and immigrants will also raise demand for condo rentals. This in turn will potentially raise buyer interest from both homeowners and wannabe landlords. According to Canada Mortgage Housing Corp. (CMHC) over 11,000 condos were added to the Metro Vancouver rental market last year. This is believed to be related much in part to taxes on empty homes. This is good news as more investors have decided to switch to long-term rentals in light of the impact both the tax and the pandemic had on the once-lucrative business of short-term rentals.
The tripling of the empty unit tax helped bring thousands of homes back onto the rental market. Just keep in mind that this also comes with a rent freeze in Vancouver. So investors must measure average rents today against their mortgage payments to determine if their investment is worth it.
Sales to Active Listings Ratio
An important ratio to watch is the sales to active listings ratio. For example, the number of homes listed for sale in Vancouver entering 2021 dropped 0.8 percent compared with December 2019 and 23.2 percent compared to November. That put the sales-to-active listings ratio at 36.2 percent at the end of 2020. Why is this important? Because when the ratio rises above 20 percent for a longer period of time, home prices tend to rise. Real estate experts will keep an eye on this number to help make their home price trend forecasts accurate.