Vancouver housing market to remain strong

By Cameron McNeill
January 30, 2018

A new year means a new real estate report analyzing the outgoing year, current market conditions and providing a forecast for 2018. As predicted, 2017 slowed in comparison to the manic activity of 2016, but, relatively speaking, was still extremely active with the Lower Mainland leading the nation at almost 15 per cent in price escalation.

Each year MLA Advisory prepares a Market Intel report analyzing global market trends and studying consumer demand with a spotlight on Greater Vancouver. Similar to many of the world’s most vibrant centres, Vancouver continues to thrive and evolve rapidly. It is actively being shaped by the very same forces that influenced many of the world’s energy centres, such as Sydney and London. The overall housing market in Greater Vancouver will remain strong and active but will experience a slower rate than the previous two years.

Affordability

Unfortunately, growth rarely comes without challenge. In 2018, affordability will continue to be an issue, due to tighter lending regulations and the restricted land supply’s inability to keep up with demand. This continued upward pressure on price places demand on the market for an increase in housing options with an emphasis on new condos and apartments. In the City of Vancouver, compliance costs for developers are extremely high, equating to nearly $78,000 per new home being built. These costs, whether Community Amenities Contributions, transit levies, or policies requiring fees, eventually get passed to the consumer, adding additional pressures to the debate around affordability.

The gap between income and property values continues to widen in Vancouver in comparison to other cities such as San Francisco, Sydney and Manhattan, which are also considered highly unaffordable, yet all continue to see growth – even with government attempts to curb price escalation.

Vancouver’s affordability ratio at 17.4 is extremely high when compared to more normalized cities like Chicago, Austin, Houston, Seattle and Toronto, with ratios all between four and 10. The affordability ratio is calculated based on the median household income compared to the median property value. If housing prices remain consistent, the ratio could begin to normalize with heightened income levels, which are anticipated to occur as the work force demands higher wages to sustain livability in the city.

Pre-Sale Market

Across the Lower Mainland we are predicting that 62 projects and more than 11,000 units will be released over the course of this year. This is an increase of more than 33 per cent compared to 2017 but will likely bring slower price growth similar to the resale market for this year. In 2018, lengthy approval processes and complexities around lending are the major threats to the much-needed supply levels reaching the market.

In 2017, Burnaby was the most active concrete pre-sale market launching 1,920 units. This growth is expected to continue in 2018 with more than 4,500 units. North Vancouver and New Westminster, which saw very few projects come to market in 2017, will experience an increase in supply over the course of this year.

There has been an influx in multi-family developments coming to the market over the last two years that is helping to shape the North Shore community, especially for transitioning young couples, families and downsizers. There are more than 50 development applications slated for review by North Vancouver’s city councils, which will equate to more than 3,700 condos and townhomes in the future. With more projects on the horizon, you can expect even greater transformation of neighbourhoods, with amenities, dining, entertainment and activities growing in number.

MLA Advisory Market Intel report anticipates more than 11,000 new concrete units in Greater Vancouver this year.

2018 Forecast

Overall, market fundamentals indicate 2018 to be a stable and positive year. GDP, job growth, consistent population and housing starts, plus nominal interest rate changes all maintain consumer confidence and a natural flow of investment. Until Vancouver stops being a safe, healthy and beautiful place to live, we predict an elevation in Vancouver’s ranking as a sustainable global city.

About Cameron McNeill

Cameron McNeill is co-president of MLA Canada, a comprehensive real estate service provider in Canada. Partnering with residential developers, MLA Canada offers an unmatched level of expertise in advisory services, market intelligence, project marketing, sales, customer care and administration.

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