Metro Vancouver posted record housing construction in midst of falling prices
Credit to Author: Derrick Penner| Date: Fri, 10 Jan 2020 01:52:04 +0000
Metro Vancouver saw record levels of housing starts in 2019, suggesting the market is “finding its footing” after a period of declining sales and falling prices, according to reports Thursday.
Canada Mortgage and Housing (CMHC) reported that Metro saw developers start construction on 28,141 new homes in 2019, up 20 per cent from 2018, with a substantial number of those, some 6,727, purpose-built rental units.
The CMHC report came out on the same day that Royal LePage released its latest house-price survey showing that aggregate home prices across the region declined 4.8 per cent in the fourth quarter of 2019 but in a market showing signs of recovering sales.
Royal LePage found that the condo markets in West Vancouver and North Vancouver were the only segments to see prices rise in the fourth quarter, by 6.3 per cent and 3.3 per cent, respectively.
And it was condo housing starts across the region that saw the biggest boost in construction, albeit with a “recalibration” of pricing levels, according to CMHC analyst Eric Bond.
“There is demand, strong demand for homes in price ranges that can be reasonably purchased by people based on their local incomes,” Bond said. “That’s where sales have been the strongest. The market is finding its footing again and developers are taking that longer-term view that, ‘I’m building for 2021, 2022.’ ”
And the record starts for 2019, which Bond said exceed the last record set in 2016 by about 200 units, brought the total number of housing units under construction in Metro to 46,000, another record.
“What that means is everyone is busy building,” Bond said, leading to constraints on the availability of materials, equipment and labour for building, which will help keep a lid on growth in housing starts over the next two years.
However, the sheer number of homes being completed over the coming years, particularly condos, might also bring an additional dampening effect to either prices or rents, according to University of B.C. academic Tom Davidoff.
“I think completions (of units) are very good for the resale market and the rental market,” said Davidoff, director of the UBC centre for urban economics and real estate at the Sauder School of Business. “A lot of the buyers are investors, so I think we’ve seen a slowdown at least in the rate of growth in rents in the last year.”
However, the news of increased construction comes at the same time that sales have increased in the market for existing homes, which has others estimating the prices have at least stopped declining. Royal LePage tracked declining prices across Metro in the last three months of 2019 with the median price of a standard two-storey home falling 4.7 per cent to $1.4 million. The median price on condos fell six per cent to $645,607 over the same period.
Inventories are also declining at the same time that sales have increased, said Randy Ryalls, general manager of Royal LePage Sterling Realty in Port Moody, which is “a good sign of recovery on the horizon.”
“I think the correction is over,” Ryalls said. “I don’t see anything lining up to say that prices are going to fall.”
At the same time, the dramatic decreases in property prices have happened more at the high end of the market among homes priced over $2 million. Townhouses in the suburbs that were priced in the $700,000-$800,000 range, however, didn’t see corrections as steep.
“I don’t think anybody would look at Vancouver’s market and say, ‘Oh, OK, it’s affordable now,’ ” Ryalls said.
Davidoff said some people hoped that the market downturn, influenced by the federal mortgage stress test and provincial foreign-buyers tax would help make Metro’s market more affordable.
“I think we’ve learned that just getting rid of outside demand is not going to get us all the way to affordability,” Davidoff said.