Home construction in British Columbia will need to rise to unprecedented levels to offset the impact of record immigration on the housing market, the B.C. Real Estate Association said in a new report on Tuesday.
The province must build 25 per cent more new homes than usual for the next five years to address deteriorating housing affordability, the association said in the report.
Construction needs to be ramped up to a record 43,000 housing completions a year for the next five years to counteract rapid population growth, up from an average of around 30,000 between 2000 and 2022, it said.
“While this pace of completions is close to that achieved from 2020 and 2021, higher interest rates and weaker market conditions make that rate of completion less likely,” the association said.
Lowering price growth so incomes can catch up to prices is integral to improving housing affordability in B.C., said Brendon Ogmundson, chief economist with BCREA.
Increasing supply would ease the upward pressure on housing prices from an immigration-driven demand shock and if sustained, help improve overall affordability, he said.
B.C. is expected to welcome an estimated 217,500 new permanent residents from 2023 to 2025, nearly double the historical average immigration levels, the
In that time, two federal government policies — the ban on foreign homebuyers and record-high immigration targets — will be the key factors shaping housing demand in B.C., the association said.
Bill C-19, which implemented a two-year ban on home sales to non-Canadian buyers, will help offset some of the demand for housing, said BCREA, but not nearly enough compared with the expected demand from new immigrants.
There is “weak evidence” that the ban will achieve its objective of lowering home prices given that a relatively small number of transactions involve purely foreign buyers, the association said.
“The potential impact of the increase in immigration is much more significant than the decline in sales due to the prohibition on foreign buyers,” the report said.
BCREA said an “unfortunate unintended consequence” of the ban on foreign homebuyers is that financing new home construction is more difficult without access to international capital markets.