Red-hot BC housing market will peak this year, cool in 2022: Central 1

As we inch closer to the middle of 2021, there’s no question that it’s already been a barnburner of a year for BC’s housing market.

Signs that the heat is coming down by a few degrees have recently emerged, but a new forecast from Central 1 Credit Union maintains that the “red hot” environment will remain for the rest of the year.

In commentary published earlier this month, Deputy Chief Economist Bryan Yu wrote that sales and price gains are set to remain elevated with conditions continuing to favour home sellers.

The economist forecasts that home sales will end the year up 37 percent compared to 2020. The province’s housing market, following years of sluggish activity, had already posted significantly higher sales last year compared to 2019 as mortgage rates hit record lows and the pandemic shifted buyer preferences to larger suburban homes.

But Yu believes the market will reach a peak in 2021 and cool down over the next couple of years as the pandemic’s impact runs its course.

“[C]urrent trends are unsustainable and a move towards a normal market environment is expected in the second half of the year as the pandemic wanes,” Yu wrote.

In 2022, the economist estimates that sales will fall by 21 percent, followed by another nearly four percent drop in 2022.

“The primary drivers of the current boom are low borrowing costs and a shift in household pandemic preferences. Both are outside the control of policymakers and are expected to naturally wane as the pandemic eases,” he wrote in the forecast.

The declines in sales forecast for 2022 and 2023 would bring transaction volumes in line with historical averages for the province.

Meantime, Yu expects the median BC home price to climb by 10 percent to $643,000 this year, with growth slowing to the three to four percent range in 2022 and 2023.

While 2021 may be the peak when it comes to sales activity and price growth — at least, for the foreseeable future — the economist writes that a lack of housing supply and a growing population will support housing market strength for years to come.