A new report from Canada Mortgage and Housing Corporation predicts new housing starts in B.C. to decline in 2024 before rebounding in the following years.
CMHC’s Housing Market Outlook also predicts that vacancy rates will remain low in Greater Vancouver and Greater Victoria as demand outpaces supply, while rents will continue to rise.
The report predicts that high home prices in B.C. will make certain home types unaffordable. Developers, meanwhile, will hold back when it comes to building new units because of high financing costs and low labour supply.
Looking at the Greater Vancouver, the reports paints a mixed picture. It notes that rental construction has “gained traction in recent years” with multi-units starts on the rise.
“Despite tight financing conditions expected to impact activity in 2024, demand for rental housing continues to drive growth in purpose-built rental construction,” it reads.
The report also predicts that zoning changes increasing density on single-residential lots will “pave the way” for higher density development in single-residential zones. “This will likely lead to an increase in ground-oriented multi-family developments in the upcoming years,” it reads.
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But the report also notes that high land and construction costs, along with financing constraints are “making it hard for some multi-family projects to move forward.”
Vacancy rates in Greater Vancouver are set to hover just below 1 per cent for the coming years. Figures for 2024 peg the vacancy rate at 0.8 per cent, rising to one per cent in 2026. Rents are also supposed to go up. CMHC is forecasting that a two-bedroom unit will rent at $2,380 per month in 2024, rising to $2,800 in 2026.
Greater Victoria, meanwhile, will also see fewer multi-family housing starts in 2024 thanks to what CMHC calls “financing challenges and labour constraints” before rebounding in 2025.
The rental market is also expected to remain tight. CMHC is forecasting a vacancy rate for 1.6 per cent for 2024, rising to 1.7 per cent in 2026.
Looking more broadly, CMHC expects the economy to remain weak through 2024 before rebounding in 2025. CMHC also expects interest rates to decline, ultimately leading to lower interest rates starting in mid-2024.
“In 2025–2026, lower interest rates, milder construction cost growth and government support should make more projects viable,” it reads. “Homebuyers can also expect lower interest rates as real incomes and confidence levels improve. Consequently, more homes are expected to be built in 2025–2026.”