2016 Economic Forecast As It Relates To The Vancouver Real Estate Market

 

 

 

 

I just attended the company’s 2016 Sales Kickoff meeting and heard the yearly economic presentation by Bryan Yu from Central 1 Credit Union.  

 

I’ve attached the pdf for your convenience in the link above, but I’ll summarize the main points from his presentation and from his talk below:

– China economy still weak and slowly recovering (~6% growth)

– Euro economy around 1% growth

– US labour market at 5% unemployment (down from close to 10% in 2011)

– Oil prices low due to too much supply

– Cost to produce NEW Oil for Canada, around $70/barrel

– Canada’s interest rate – no anticipated increase in forecast until at least mid 2017

– BC economy much better than other provinces

– BC labour market incredibly strong

– Increasing # of housing starts in the past few years, but demand is STILL more than supply, developers frantically developing to quench high demand

– Based on economic fundamentals, no bubble in sight

– Year over Year MLS HPI Benchmark Price going up 13 – 28%

– Vancouver Vacancy Rates for Condos at ~0.9%

– Real Estate works in cycles, so there will be Housing Correction in the market eventually, but it’ll likely have to be a recession and will likely be in the 10 – 15% range (Historic:  20% drop during 9/11, 11% drop during 2008 financial crisis)

– Millennials still want what their baby boomer parents had, ie live in a house

– City’s plans are to increase densification and detached housing stock decreasing rapidly, increase multifamily zoning

 

My personal takeaways:

– bidding wars are common now even amongst condos, and by the time a market correction happens, prices will have gone up so much that a market correction won’t help in terms of affordability, 

Example:  when houses are at $1M, having a 10 – 15% housing correction after houses go up to $2M doesn’t really help a majority of buyers

 

My recommendations for buyers:

Housing prices are increasing, faster rather than slower, unfortunately, it is much harder for buyers than it is for sellers.  

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