The housing market is influenced by many different factors. For the most part, like any other market, it all comes down to supply and demand.
Various factors play a role in influencing the supply and demand of the housing market, including population growth and migration, new-home construction, government policy, and economic conditions such as employment.
To help buyers and sellers as we enter a new year, a few predictions for the state of the market in 2019 have been made. Keep in mind, these are not 100% certain — simply predictions based on past data, new policies and current trends.
Housing sales volume and price growth expected to slow
After experiencing record breaking years in 2016 and 2017, the volume and price of housing sales is expected to continue to slow in 2019. While average home prices are expected to moderate over 2019 and into 2020, there is little evidence of a significant decline in price.
This slowdown is being intensified by stricter housing policies and credit restrictions, rather than a weak economy. Despite these changes, the market is expected to remain quite healthy and balanced.
Tight housing policies will continue to moderate demand
Housing demand is expected to continue to slow in 2019 due to tougher mortgage rules, such as stricter rules around the stress test, and higher interest rates. Borrowing costs are expected to rise, and further mortgage rate hikes are expected over the next couple years.
It has been estimated that federal measures have cut purchasing power for the marginal buyer by about 20%. This is especially true for first time homebuyers — even those with high down payments may find that they have to wait longer to buy a home or lower their expectations concerning what they can afford.
Those looking to sell and move into a more expensive home are also affected, having to re-qualify at a higher interest rate if changing lenders.
Provincial measures, such as the speculation tax, is expected to dampen investor demand.
Housing supply expected to increase
With more newly-constructed homes coming on-stream, and lower demand, supply is expected to increase, although chronic housing shortages means that we’ve got a ways to go before supply meets demand. This shift will continue to balance the market. New home construction has, however, declined from the highs of recent years.
As new housing inventory becomes available, rental vacancy rates may increase — however, this could be inversely affected by a swelling rental pool as less people are able to afford a home, keeping them in rental accommodations for longer.
Population and employment expected to grow
Population for much of the Okanagan area, including Kelowna, West Kelowna, Lake Country and Peachland, is expected to grow in 2019, as are jobs, but not at the same pace as recent years.
The slowdown of the Alberta economy has lessened the rate of migration to the area in recent years and the BC Government’s introduction of the speculation tax may have a further dampening effect. However, migration from elsewhere within BC (especially the Lower Mainland) may offset the slowdown from Alberta.
Overall, a decrease in demand and an increase in supply is expected to help balance the market in 2019. Stricter housing policies, government intervention and new home construction will all have an impact on this year’s market.