Home prices and especially rents in Metro Vancouver are expected to continue their upward march over the next two years, according to an annual economic forecast from the Canada Mortgage and Housing Corporation.
Rents up
The nation’s housing agency suggests the average two-bedroom rental will hit about $2,800 by 2026, up from $2,380 today and $1,824 in 2021.
The vacancy rate currently sits at 0.8 per cent and will barely get much better in 2026 when it hits 1.0 per cent.
The agency expects turnovers will continue to be low, as existing renters have “limited alternatives” in the rental market.
New policies to lessen international student migration will lower renter demand in the region but not enough to keep prices from rising. The same can be said about “record levels of purpose-built rental units under construction.”
Construction down
Home construction is expected to dip this year but rebound in 2025 until potentially reaching record levels in 2026, although a high level of uncertainty comes with such a prediction.
The agency forecasts a low of 25,900 housing starts in 2024 but a high of 31,900, following a record 33,244 starts in 2023. For 2025, the low forecast is 27,100 and the high is a record 38,500. Housing starts could reach 41,000 in 2026.
“High land and construction costs, along with financing constraints are making it hard for some multi-family projects to move forward,” the report states.
But, “persistent demand” and new provincial zoning for higher density in single-family neighbourhoods should stoke demand, if not interest rate reductions from the Bank of Canada.
However, prolonged periods of elevated interest rates present a risk to the construction industry.
The agency expects municipalities outside of Vancouver, such as Coquitlam, Port Coquitlam, Port Moody, Maple Ridge, Surrey, Delta and Langley will experience a boom in rental home construction due to lower land values.
Home prices steady, if not rising
Meanwhile, home prices will continue upward, to a low forecast of $1.19 million and high forecast of $1.44 million, come 2026, up from $1.21 million in 2023.
“Resale activity is expected to pick up in 2024 across Metro Vancouver. The trend of declining prices that began in 2022 is expected to end in 2024. The average resale price will grow in 2025. By 2026, the average resale price in the Lower Mainland will surpass all-time highs last seen in early 2022,” the report states.
“Prices in 2024 will be supported mostly by expectations of lower mortgage rates as the Bank of Canada may begin cutting the policy rate by mid-2024, continuing into 2025,” the report adds.
Lower-priced homes will be in higher demand from first-time homebuyers should rates fall by 2025, the agency said.
Overall, the agency summarized, “Metro Vancouver’s economy was resilient in 2023, despite contractionary monetary policy. In 2024, it should see marginal growth, before expanding in 2025 and 2026.
“The unemployment rate in the region rose from recent lows at the end of 2022 but has since moderated to levels seen in 2016. It is expected to stabilize at these higher levels, before coming back down in 2025 and beyond.”
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