Report: 25% more home completions needed in B.C.

Key Takeaways:

• B.C. Real Estate Association say 25% more homes need to built above historical averages to impact prices. 
• The association argued that population increases, rather than foreign buyers, will have the most impact on affordability in the coming years. 
• The federal government recently relaxed restrictions on foreign buyers. 

The Whole Story

Realtors in B.C. are warning that home completions need to increase massively for affordability to be achieved. 

A new report from the B.C. Real Estate Association (BCREA) found that new home completions in B.C. need to increase 25 per cent above their historical average level for the next five years to fully offset the deterioration of housing affordability. This would require a record level of about 43,000 completions per year.

According to the latest Market Intelligence report from the association, two significant federal government policies – the Foreign Buyers Ban and record-high immigration targets – will shape housing demand in BC over the next three years.

The association said it found weak evidence that Canada’s Foreign Buyers Ban will achieve its objective of lowering home prices, with an estimated reduction in home sales of 2,400 units in BC over the two-year ban.

The report noted that B.C. will welcome an estimated 217,500 new permanent residents from 2023 to 2025 or 100,500 more new permanent residents than would be expected based on historical average immigration levels. This translates to a 20,500-unit increase in housing demand from new permanent residents.

Impact of immigration

The association added that the demand impact of the increase in immigration is approximately five times as large as the Foreign Buyers Ban and is estimated to place significant upward pressure on home prices. 

“Lowering price growth so that income growth can catch up to prices is integral to improving housing affordability in BC,” says Brendon Ogmundson, BCREA chief economist. “In our simulations, an appropriate supply response can offset the negative impact on affordability from an immigration-driven demand shock and if sustained, can achieve a permanent improvement in affordability in BC.”  

Ogmundson explained that it is essential to create policies and programs that support and welcome immigrants while addressing the consequent pressures on an already stressed housing market.

“To ease the pressure on the housing market that arises from sudden changes in housing demand, governments can take steps to increase housing supply,” he said. “This can include zoning changes to allow for more housing construction, increasing funding for affordable housing programs, and providing incentives for developers to build more housing units.”

Only recently has the government started tracking foreign home buying. The Canadian Housing Statistics Program shows that non-residents only own about two to six per cent of Canadian residential properties in 2020.

Foreign buyer changes

The federal government recently announced revisions to foreign buyer restrictions including:

• Enabling more work permit holders to purchase a home to live in while working in Canada. 
• Repealing existing provision so the prohibition doesn’t apply to vacant land. 
• Adding exceptions for foreign home developers.
• Increasing the corporation foreign control threshold from 3% to 10%.

“To provide greater flexibility to newcomers and businesses seeking to contribute to Canada, the Government of Canada is making important amendments to the Act’s Regulations,” said Ahmed Hussen, minister of housing and diversity and inclusion. “These amendments will allow newcomers to put down roots in Canada through home ownership and businesses to create jobs and build homes by adding to the housing supply in Canadian cities. These amendments strike the right balance in ensuring that housing is used to house those living in Canada, rather than a speculative investment by foreign investors.”