Cameron Muir, the chief economist for the British Columbia Real Estate Association, took a look at B.C.'s residential real estate outlook at the CanaData West Construction Industry Forecast Conference in downtown Vancouver.
Muir said the British Columbia economy is strong, which is helping to keep the housing market healthy. In B.C., he said, there is less exposure to oil price shocks and other similar factors.
By contrast, Calgary's housing market is down by 20 per cent, though prices there are somewhat "sticky" or slow to change on the way down.
The impact of low oil prices on home sales is that there has been an increase in activity in Vancouver, since jobs are not dependent on the oil industry and lower gas prices actually help with demand.
The falling loonie has led to mixed export results, Muir said, and added that housing starts are increasing in the U.S., which might lead to more export sales for B.C. However, U.S. housing is regional, meaning varying demand depending on geographic area.
Retail sales in B.C. are "driving the bus right now," Muir said, with very strong activity signaling increased consumer confidence.
Employment data has been unreliable for this part of the world, he said, with divergent results based on the source. The Labour Force Survey doesn't paint a rosy picture, but most of the other indicators of the economy suggest a healthier labour outlook.
Going forward, "I don't expect to see a lot (of change)," Muir said, referring to overall interest rates. On the mortgage rate side, we are at the bottom of a 25 year decline, Muir said. As long as interest rates don't climb dramatically in a short period of time, housing prices should remain stable, he said.
Debt to income ratios are not an ideal indicator to show the presence of a bubble, Muir said. There will be a very gradual increase in mortgage rates, he said. But, if the rates were to continue going up, there will be an impact on carrying costs of houses, but not a substantial one.
"People with variable rates tend to be further along in their income cycle," he said.
Overall sales activity in B.C. and in Vancouver was low in the late 1990s, with the economy in the doldrums and the leaky condo crisis, with housing starts in 2000 in their lowest level since 2002. That was one of the reasons for a dramatic price increase from 2002 to 2008, since there was not enough supply at the time. The market had shifted long before the financial crisis, so the dip of 2008-2009 was "short indeed," Muir said.
It turned out housing in spring 2009 was more affordable than it had been in years in Vancouver, Muir said, and bounced back up. There has been choppiness, but overall it was a slow modest pullback in demand, with sales taking off over the last couple of years.
Inventory has declined due to the stronger sales, Muir said, with an eight year low for inventory at present. B.C. market conditions as measure by a sales-to-active listings ratio is a "seller's market," he said.
Muir said there hasn't been speculation in the housing market in Vancouver since 2009, measured by observing how many houses are being sold within six months of being bought. The foreign buyer issue, Muir said, developed because of a company called MacDonald Realty, which had an office in Shanghai and specialized in foreign buyers. The company looked at the number of customers with Chinese last names and they found 70 per cent of their customers who bought houses over $3 million had those Chinese last names.
But, Muir said, what was ignored by the media is that most of those customers were either Canadian citizens or landed immigrants. Essentially, Muir said, those who are claiming foreign buyers are dominating the market are "drinking their own bathwater" when reporting this information.
"Before we start calling people with Chinese last names 'foreign buyers,' we should get our stats straight, particularly when 20 per cent of all people living in the Lower Mainland are ethnic Chinese," he said.
Foreign residents are at their highest (from 2011 census) in Victoria at 7.55 per cent. Vancouver, at 5.35 per cent is "right smack in the middle" compared to the rest of the country and one of the lower regions in British Columbia, Muir said. Foreign investment (according to informal polls) are at two to four per cent, while domestic investment hovers at 10 to 15 per cent.
Prices are going up due to the lower amount of single-family detached homes in Vancouver, while apartment sales are holding steady. "What we are producing is townhouses and condominiums, which are still down in price in Surrey and Langley, compared to five years ago. In terms of affordability, condominiums are where it's at," Muir said.
Almost 80 per cent of homes sold in Metro Vancouver were priced below a million dollars, Muir said. The focus seems to be on houses worth more than $3 million, and "I don't know why we care about them," he said, since they are such a small number.
Homes sales will be up 25 to 30 per cent over the next year, Muir concluded, but more so in the Fraser Valley than in Metro Vancouver.
The Second Annual CanaData West Economic Forecasting Conference is taking place at the Vancouver Convention Centre on Oct. 22. Check back for more blogs, stories and videos from the conference or join the conversation on Twitter at @JOC_Canada.