The past few years have seen unprecedented change in the BC real estate industry. While price inflation has been the big story, there have also been rapid shifts in market preferences, intense competition within the industry, concerns about eroding professional standards resulting in the introduction of a new regulatory regime, and changes in government policies that have all presented major challenges. Moreover, the trend toward rapid change is likely to continue in 2018. In the face of all this uncertainty, one thing is very clear: more than perhaps ever before, the support of your brokerage will be critical to your success . Where the market is heading is anyone’s guess, and the uncertainty is greater than ever, with strong forces working both for and against continued price escalation.
Headwinds keeping prices in check include:
- Existing High Prices
- Rising Interest Rates
- A mortgage lending Stress Test designed to ensure new mortgagees can afford rising rates
- The Vancouver Empty Homes Tax
- Increasing Capital Controls for money coming out of Mainland China
- Talk from the BC Provincial Government that they want to see prices not just soften, but fall
- Policy changes in the recent BC Provincial Government aimed at curbing real estate price growth, including punitive extra property purchase taxes applied to “foreign” buyers
However, tailwinds, possibly more forceful than the headwinds, include:
- Continued historically-low interest rate environment
- Demographics that show that the Millennial generation has just surpassed the baby boomers in size and are just entering their prime household formation years
- The strongest economy in Canada with an historically low unemployment rate
- An increase in Canadian immigration from 250,000/year to 340,000/year
- Record numbers (100,000+) of foreign students in BC schools, many of whom come from prosperous families whose agenda is to enable the kids to immigrate to Canada after completion of their studies
- 1.5 million 10-year unlimited entry Visas issued to Chinese nationals in only 3 years
- A vibrant hi-tech sector that lures many well paid young professionals to the province
- The fact that BC is a prime retirement destination for aging baby boomers from all over the country
- One of the highest household net worth averages in North America at $1.6 million/household
- Growing political uncertainty in China, the major source of foreign capital invested in BC real estate
Interestingly, while the strongest headwinds are driven by BC government policy, so are some of the more pronounced tailwinds, such as the policies of encouraging tourism and promoting the province as a destination for foreign students. Moreover, Federal government immigration programs, ostensibly aimed at economic development in other provinces, in fact drive billions of dollars annually into BC’s residential real estate market. In the realm of policy, it is possible that Federal policies will overwhelm anything done at the Provincial or Municipal levels. And, of course, the most forceful tailwinds are still being generated by pure economic fundamentals of low supply and strong demand.
This entry was posted on and is filed under .