The first BC Real Estate Market Forecast for 2021 has now been released by the BC Real Estate Association.
After an unprecedented and often surprising performance in 2020, the provincial housing market is set up for a very strong year in 2021. As the BC economy emerges from recession and COVID-19 immunizations progress, we anticipate a flood of consumption spending into the economy as confidence grows. That spending, along with the resumption of major capital projects, improving global trade and normalized immigration, will propel BC economic growth to its best showing in years and provide a boost to the recovery of the BC labour market.
Strong underlying demand will be further boosted by Canadian mortgage rates that were driven to a new record low as the Bank of Canada focused its program of quantitative easing (QE) at the middle of the Canadian yield curve. With the Bank buying $4 billion in 5- and 10-year bonds per week, the benchmark 5-year Government of Canada bond fell to as low 0.30 per cent and dragged 5-year fixed rates to an average of 1.84 per cent. Along with a massive expansion of its balance sheet to facilitate QE, the Bank of Canada has also reaffirmed its plans to keep its overnight policy rate at 0.25 per cent until it sees slack in the Canadian economy fully absorbed. Given current forecasts for economic growth, that may not occur until 2023, meaning these low rates will be around for quite some time.
The combination of those factors signals a very strong year for home sales, with total MLS® sales likely hitting a four-year high of 108,680 in 2021 before dropping back to a still-strong 98,850 unit sales in 2022.
On the supply side, new listings activity recovered through the second half of 2020, but not nearly enough to see any accumulation in overall inventory. Most markets around the province are near historical lows in terms of active listings. As a result, market conditions will start the year very tight, with the potential for strong price increases through the spring and summer until new supply comes online. We are forecasting a 7.7 per cent rise in the MLS® average price this year, followed by a further 3 per cent increase in 2022.
Please note the Central Okanagan / Kelowna Real Estate Region has now been amalgamated with other nearby areas and is now know as the Association of Interior Realtiors®, so is shown as the 'Interior' in the caption below.
Our Region is forecasted to see an increase of 9.9% in unit sales this year before falling back by 10.4% in 2022. MLS® prices are predicted to rise by 8.8% this year and a further 1.6% in 2022.