The COVID-19 pandemic and associated recession have impacted housing markets in unexpected and unpredictable ways. Despite what may be the worst recession in BC history, the housing market had a record fall season and prices are rapidly rising as pent-up demand floods into an under-supplied market. As that pent-up demand from the loss of a spring season fades, sales will likely slow from their current pace, but activity is expected to remain strong as record-low mortgage rates and a recovering economy continue to drive sales.
The average Canadian 5-year fixed rate has fallen to under 2 per cent, the result of a rapid and overwhelming policy response to the COVID-19 pandemic from the Bank of Canada. The Bank has signalled that it may hold its policy rate at its effective lower bound of 0.25 per cent until as late as 2023 and will continue its quantitative easing program until the Canadian economy is on a sustained path to full recovery. The combination of those actions by the Bank of Canada should keep mortgage rates very low for the foreseeable future. The BC economy is showing signs of recovery, though that recovery is very much K-shaped in that some sectors are recovering at a much faster rate while others continue to languish.
Higher-wage sectors have seen employment fully regain pre-pandemic levels, which partially explains the continued strength of the ownership market in BC. Positive developments in the search for a COVID-19 vaccine will help broaden the recovery in 2021 and allow for a normalization of immigration to BC. Those factors will further boost the already strong housing demand. On the supply side, active listings remain low due to hesitation on the part of sellers to list during the pandemic. Some additional supply may come online following the end of mortgage deferral programs, but given the tightness of market conditions, that supply is unlikely to be disruptive.
A strong second half of 2020 has sales on pace to reach 90,450 units. We anticipate strong momentum heading into 2021, with sales ultimately rising 9.7 per cent to 99,240 units. The provincial MLS® average price will finish the year up 9.9 per cent before rising a further 2.6 per cent in 2021.