It was a record-breaking 2020 in the BC housing market. It was a record-breaking 2021 in the province’s real estate industry. Will this trend persist in 2022?
From Chilliwack to Victoria, British Columbia has enjoyed exceptional growth throughout the COVID-19 public health crisis, in terms of home sales and prices. Much of this is a result of strong demand and low inventory, and a testament to the professionalism and adaptability shown by BC real estate agents.
Last year, according to the British Columbia Real Estate Association (BCREA), residential sales surged 32.8 per cent year-over-year, totalling nearly 125,000 transactions province-wide. The immense demand, coupled with shrinking housing supply, resulted in an 18.7-per-cent increase in sales, at an average selling price of $927,877.
Moreover, total active residential listings fell 41.2 per cent to an all-time low of just 12,179 units. But new housing construction did pick up in December, advancing 29 per cent year-over-year, according to new data from Canada Mortgage and Housing Corporation (CMHC). While inventory levels are at historic lows right now, more supply could be coming online in the future.
“Last year was a record year for BC home sales with seven market areas setting new highs,” said BCREA Chief Economist Brendon Ogmundson in a statement. “Listings activity could not keep up with demand throughout the year. As a result, we start 2022 with the lowest level of active listings on record.”
What might this mean for the year ahead? The future remains to be seen, but many expect activity across the BC housing market to continue on the same upward trajectory.
BC Housing Market Could Sustain Record-Breaking Activity
Up, down or stagnant? It depends on who you ask in this market.
The consensus throughout the BC real estate industry is that housing prices are expected to continue rising, buoyed by shrinking supply and decent demand. However, growth may not be equal as some prospective homebuyers trade major urban centres, such as Vancouver and Victoria, for suburban locations within the province.
For example, according to the RE/MAX Canada 2022 Housing Market Outlook Report, Vancouver and Victoria could see price gains of 5.5 per cent and five per cent, respectively. However, home prices in Nanaimo and Kelowna could rise eight per cent and nine per cent, respectively, according to insights from local RE/MAX brokers.
Despite the regional trends, the overall BC housing market will likely benefit from a couple of factors.
The first is the federal government’s plan to accept more than 400,000 new immigrants or permanent residency applicants into Canada this year. Since Vancouver is the nation’s third-largest city and a common landing place for those arriving from East Asia, fresh demand could be the norm for the next several years.
The second factor is that interest rates will likely remain low in 2022. Although the Bank of Canada (BoC) is expected to tighten monetary policy this year and pull the trigger on a couple of rate hikes to curb inflation, rates will still sit below the historic average. This will keep a lid on borrowing costs, allowing high-income homebuyers, or those with a lot of equity, to bid up a property.
That being said, the BCREA does not expect 2022 to be a record-setting year. Instead, according to commentary from the association’s chief economist late last year, activity will only be “vigorous.”
“After a frenzied start to the year, activity in BC housing markets has settled back to a level that is broadly in line with long-run trends. The strength of the first half of this year has sales on track to easily break the previous record for annual sales,” said Ogmundson. “While we do not anticipate a repeat of the record-setting market of 2021, we do expect housing market activity to remain vigorous in 2022.”
But this might depend on the Bank of Canada and how it will guide monetary policy in the coming months.
Ogmundson published a new study that looked at the effects rate hikes would have on the BC real estate market this year.
According to the report, returning to a pre-pandemic level of 1.75 per cent, or even increasing to three per cent, could trigger a sharp of 25-per-cent decline in home transactions over the next two years.
“If the Bank does raise its policy rate more aggressively in response to an overheating economy, then our models show that home sales would decline more significantly,” the study said. “With markets so out of balance, we expect home price growth to slow, but to what extent depends on the final rate destination for the Bank of Canada and Canadian mortgage rates.”
Some traders are anticipating as many as six rate hikes over the next year.