Housing Market Outlook British Columbia

Housing starts are forecast to increase in 2012, following a period of stable home building in 2011. The pace of economic growth is expected to remain positive in 2012 supporting new housing construction, but stay below its trend rate of three per cent. Overall growth in construction levels will be supported by populationdriven housing demand and consumers will benefit from relatively low mortgage interest rates.

Improving labour market conditions will lend support to the housing sector as job creation is expected to shift to more full-time employment. Service-based industries, such as health care, will see employment growth stemming from a growing population. While job gains in 2011 were concentrated in the Vancouver Census Metropolitan Area, 2012 is expected to see improvement in labour markets in other parts of the province. Demand from the economies in the Asia-Pacific region for key British Columbia resourcebased exports will be a positive indicator for housing markets outside of Vancouver. Population growth in the province has slowed but is expected to add about 26,000 households per year, and this will be concentrated in Vancouver. Interprovincial migration is expected to add to the provincial population but could be affected by people looking for job opportunities in other parts of Canada and fewer people moving to British Columbia from other provinces. International migration is expected to support housing demand in specific housing markets in Vancouver.

In Detail

Single Starts: Single-detached home starts picked up the pace in the second and third quarters of 2011, but will remain below their ten-year average level, as competition from a well-supplied existing home market holds back housing starts. Job creation and population growth will boost single-detached home starts in 2012. The forecast is for 10,500 homes to get underway in 2012, compared to 8,800 housing starts in 2011.

Multiple Starts: Multi-family home starts will continue their upward trend during the forecast period. Builders are forecast to start 18,000 multi-family homes next year, up from the 17,800 units expected for 2011. Demand for denser house types, particularly condominiums, will reflect demographic trends such as an aging population. There are also affordability concerns and transportation considerations, as condominiums tend to be priced lower than single-detached homes, are located near major transportation routes, and can require less home maintenance.

Resales: The pace of resales is forecast to pick up gradually during 2012. Sales of existing homes are forecast to increase to 81,900 transactions in 2012, from a projected 77,200 transactions in 2011. An elevated level of new listings will provide buyers with ample housing choice in the near term. The level of listings is expected to decrease during the remainder of this year and next.

Prices: Resale market conditions in British Columbia will remain balanced during 2012, however some regions of the province will see market conditions favouring home buyers rather than sellers. The average MLS® price is forecast to be $564,900 in 2012, down one per cent from the 2011 projected price of $570,500.

Source: Canada Mortgage and Housing Corporation (CMHC) 

Fixed Mortgage Rates vs. Variable Mortgage Rates

Fixed Rate
A fixed rate means that your interest rate remains the same (fixed) for the entire term (duration) of the loan. Generally, this means the percentage of interest will be a little higher since the lending institution may be losing money in the future if the interest rates rise. A fixed rate loan provides the buyer with the serenity of knowing the cost of their interest will stay the same over time. This means your payment and the amount that goes towards reducing the principal (original loan amount) will remain the same over time as well.

Variable Rate
A variable rate means the percentage of interest that you are repaying will vary based on the changes in the interest rate(s) of the overall market. Typically, fluctuations in your interest rate will not alter your monthly payment, but will vary the amount of your monthly payment that goes towards reducing your principal (original loan amount). This means if overall interest rates go down you will actually be paying off your loan more quickly. On the other hand, if interest rates increase, you will be paying off your loan more slowly. Accepting a variable rate does involve a certain amount of risk but can work to the advantage of the buyer over time.

Open Mortgage vs Closed Mortgage (mortgage types)

Open Mortgage
An open mortgage means that the loan can be paid back partially or in full without incurring any penalties. The mortgage can also be renegotiated if market conditions or your financial situation shift. Although an open mortgage provides more options and opportunities for life adjustments, this comes at a cost, as the interest rates for this type of loan tend to be higher. For those able to make larger payments or who plan on selling their home within a short period of time; however, an open mortgage can be a solid choice.

Closed Mortgage
The advantage of a closed mortgage is that the interest rates tend to be lower, but options are limited. Typically a homeowner may make extra payments or larger payments as long as the sum of the payments does not exceed a set amount determined in the loan agreement. Payments exceeding the agreed upon amount; however, would incur penalties.

Although most buyers will elect to choose a closed mortgage, there are advantages to choosing the open mortgage. For instance, if market conditions are expected to change, the type of mortgage should be balanced against the type of interest rate so that as the buyer your needs are .

Best Mortgage Rates British Columbia

No matter which province or territory you reside in, finding the best mortgage ratecan save you thousands of dollars. Obviously, there are not many people who can purchase property without taking out a home loan. Taking out a home loan lets you buy, live in and/or use a home without needing to come up with the full dollar amount at the time of purchase. Usually the amount of the loan is equal to the majority of the home’s worth, but the downfall of this is that you will be required to pay interest on the loan. Most lenders insist on a down payment, i.e., a payment equal to a portion of the property’s worth. For instance, if a home is worth $200,000 and the buyer would need to make a down payment of 10%. This would equal a $20,000 down payment ($200,000 x 10%). To make up the balance, the lender would loan you $180,000 ($200,000 minus the $20,000 down payment).

When you are dealing with interest rates on large amounts of money even a variance in interest rates as small as an eight of a percent can make a significant difference in the amount you will be required to repay. Typically the interest is also calculated over long periods of time, which puts even more emphasis on securing the best rate possible. To make things more complicated there are also different rate and mortgage rates. This can make it difficult to determine whether you are comparing apples to apples or apples to oranges.

Interest rates can vary widely even from day to day so locking in on the best rate is extremely important. One of the easiest ways to do this is to enlist the help of a mortgage broker who can act as an entry way to a variety of lending institutions – banks, credit unions, etc. Mortgage Rate Comparison website like Ratesheet.ca could help you get the best mortgage rates and save you thousands of dollars. Its is advised that you compare mortgage rates before you lock in with any lender.

A potential buyer also needs to understand how much is a reasonable amount to borrow as well as the implications of payment frequency.