British Columbia housing sales will see another “record-smashing” performance this year before sales plunge more than 20 per cent in 2022 as price increases fall to single-digit levels, according to the BC Real Estate Association (BCREA).
The BCREA contends the outlook reflects a “natural governor” on the record-setting sales and price increase now being seen across the province.
The forecast envisions a roller-coaster ride over the next 18 months.
This year, provincewide sales will soar 33.6 per cent from 2020 to an all-time high of 125,600 units and prices will jump 13.1 per cent to an average of $893,600, the forecast states.
But the ride will change in 2022.
Brendan Ogmundson, BCREA’s chief economist said “we are coming off a record-smashing pace” where sales could reach 130,000 units or more this year following 94,013 sales in 2020, compared to a traditional level of about 80,000 transactions annually.
The B.C. housing market will remain strong in 2022, Ogmundson said, but it will see a sharp decline when compared to this year.
“In 2022, MLS residential sales are forecast to pull back 20.3 per cent to 100,150 units,” Ogmundson stated in BCREA’s forecast, released May 5.
This would equal the sales level of 2016, the former high-water mark for provincial housing sales.
”There are early signs that markets are calming from the frenetic pace of recent months and could balance out over the second half of this year,” he added.
According to the BCREA, Greater Vancouver housing sales, which surged 342 per cent in April compared to the same month a year earlier, will rise 40.8 per cent in 2021, from 2020, to 44,000 sales and the average composite home price will increase 10.1 per cent to $1.17 million.
In 2022, however, Greater Vancouver sales will drop 19.1 per cent to 36,000 transactions and prices will increase just 2.1 per cent, compared to this year.
Smaller markets will see more dramatic swings.
Chilliwack and District will go from a 51 per cent sales increase this year to a 28 per cent decline in 2021; sales on Vancouver Island will fall 22 per cent in 2022 after rising 30 per cent this year; and the sales in Okanagan will tumble 23 per cent in 2022 following sales increases of 24 per cent in 2020 and nearly 30 per cent this year.
Ogmundson said 2022 sales will be cooled by interest rates and a tougher mortgage stress test, but the real change will come from buyer fatigue.
“No one would be forecasting that we would go from beating former sales records by tens of thousands of sales to even higher sales,” he said. “There is a natural governor on the pace of housing sales.”
As for the modest prices increases next year, Ogmundson explained this will be a result of more supply coming onto to the market – listings and housing starts are already increasing, he noted – and a change in what is selling.
Current sales, he said, are largely led by more expensive detached houses, which increased the average overall transaction price, but next year will see a return to higher sales of lower-cost strata units, such as condominium apartments and townhouses.
The BCREA outlook is for an average provincewide home price of $921,800 in 2022, compared to a $893,000 this year and $781,765 in 2020.
The BCREA is not alone in predicting a slowing housing market. Some say it has already started.
In the Fraser Valley, the 338 per cent increase in April sales from a year earlier may have notched a market peak, according to Fraser Valley Real Estate Board president Larry Anderson.
“April could be the turning point in this historic market. In the last couple of weeks, we have seen evidence of a change in pace,” Anderson said. “In general, we’re seeing fewer multiple offers, fewer subject‐free offers, and homes over‐priced are starting to sit longer. These are positive signs that the market is responding to near‐record levels of new inventory.”
Kush Panatch, president of residential developer Panatch Group, Vancouver, who has been building real estate for 30 years, said the market exuberance of the last 10 months was based largely on buyers’ psychological fear of missing out.
That fear is over, he suggested.
“You have already missed out,” Panatch told Western Investor on April 21.
