Multiple Listing Service® (MLS®) residential sales in the province are estimated to reach 102,350 units this year, a decline of nearly 9 per cent from a record 112,200 unit sales in 2016. MLS® residential sales are forecast to decrease a further 10 per cent to 91,750 units in 2018. Housing demand is expected to remain above the ten-year average of approximately 85,000 units through 2018. The BC housing market is being supported by a strong-performing economy and corresponding employment growth, as well as associated consumer confidence. The BC economy is forecast to expand by 3.8 per cent this year, the fourth consecutive year of 3 per cent or more real GDP growth. The cumulative effect has fueled employment growth to its strongest performance in almost 20 years. Since January 2015, the province has added nearly 180,000 jobs. This has bolstered consumer confidence, with retail sales in BC expected to increase by an extraordinary 9 per cent this year. While provincial economic conditions appear to be on a sound footing, the housing market will face increasing headwinds in 2018.
A rising interest rate environment will certainly erode affordability in the new year, while tougher mortgage qualifications for conventional mortgagors will reduce their purchasing power by up to 20 per cent. In addition, the high level of net migration from other provinces, especially Alberta, over the past few years is expected to wane, which will slow overall population growth. These factors will likely be exacerbated by home prices that are already elevated after several years of significant rates of growth. The supply of homes for sale is now trending at or near decade lows in most BC regions. The imbalance between supply and demand has been largely responsible for rapidly rising home prices.
While slowing demand will help alleviate these conditions, the expansion of the housing stock is necessary to slow the ascent of home prices. There are now over 56,000 units under construction in the province, up 54 per cent over the last 24 months. Many of these units will be completed in 2018, adding much-needed supply to the market. The combination of slowing housing demand and a rising inventory of homes for sale is expected to move the market toward balanced conditions next year, and lead to less upward pressure on home prices.