CMHC: Tale of two markets to continue through 2018

So far this year, Fraser Valley REALTORS® have seen demand for Fraser Valley apartments and townhomes dramatically outpace that of single family detached homes and the Canada Mortgage and Housing Corporation (CMHC) is saying prepare for more of the same next year.

On October 26, CMHC released its fourth quarter Housing Market Assessment (HMA) and Housing Market Outlook (HMO)  for the Vancouver Central Metropolitan Area (CMA) – covering the Vancouver communities of West Van through to Pitt Meadows and the Fraser Valley communities of North Delta, Langley, Surrey and White Rock.

It concludes that certain areas in Metro Vancouver’s housing market are so active, they remain vulnerable. Depending on the location and property type, CMHC cites evidence of an over-heated market – nothing like 2016 – but pockets where prices have climbed too fast and homes are overvalued. CMHC attributes this trend to “low mortgage rates, stronger population growth (led by international and interprovincial migration), and solid employment figures in the Vancouver CMA.”

In a map showing year over year price increases from June 2016 to June 2017, you can clearly see that benchmark prices accelerated faster in the Fraser Valley than in Greater Vancouver. For all residential property types combined, the MLS® Home Price Index saw double-digit increases in Surrey (15%), Langley (14.5%) and White Rock (10%); in contrast to North Van (6.5%), Vancouver East (8.2%), and Richmond (6.9%).

“The largest increases were in apartments in North Delta and townhouses in North Surrey, where prices increased 36.3% and 32.3% year-over-year, respectively.”  CMHC attributes the dramatic price increases in the Valley with a lack of inventory. “While active listings under the REBGV have increased by 9%, the number of active listings under the FVREB remained flat, which has amplified the competition for homes in these markets.”

In reference to the single family detached market, the HMA shows that in a number of areas the market has returned to balance or is teetering on a buyers’ market because of the lack of affordability – areas like West Vancouver, Vancouver West, Richmond and White Rock.

In terms of what these conditions bode for the housing market in 2018, the CMHC’s Housing Market Outlook projects that the market will continue to operate “at two speeds, with a higher level of activity in the apartment condominium and townhouse segments compared with the single-detached home segment.”

The HMO covers both Vancouver and Abbotsford CMAs with forecasts right through to 2019.  For Metro Vancouver, it says prepare for a decrease in sales of single family detached next year, rising inventories and significantly reduced prices. “In contrast, the townhome and apartment segments, which are more affordable, will continue to experience strong sales activity.” It also devotes a segment of the report to the rental market indicating that with continued growth in our population and the imbalance between incomes and home prices, rental demand will remain high. It projects that Metro Vancouver’s vacancy rate will only rise to 1.1% by 2019.

For Abbotsford-Mission, CMHC has a rosy outlook. Thanks to a strong local economy attracting more people to the area combined with more affordable housing options, it’s projecting the resale market in the east Valley to remain elevated, inventory to remain low and prices will continue to rise right through to 2019.

CMHC’s next market assessment is scheduled for end of January, 2018. Your two best sources for housing market forecasts for the Lower Mainland are CMHC and BCREA’s Housing Forecast Update, also released quarterly.