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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