A new report from the BC Real Estate Association (BCREA) has revealed that to counter the decline in housing affordability in British Columbia, new home completions need to increase by 25% above their historical average over the next five years. This would lead to a record high of around 43,000 completions per year. The report states that two significant federal government policies, the Foreign Buyers Ban and record-high immigration targets, will shape housing demand in B.C. over the next three years.
While there is weak evidence that Canada’s Foreign Buyers Ban will achieve its objective of lowering home prices, the report suggests that B.C. will welcome an estimated 217,500 new permanent residents from 2023 to 2025, resulting in a 20,500-unit increase in housing demand from new permanent residents. This increase in demand is estimated to place significant upward pressure on home prices.
Brendon Ogmundson, BCREA Chief Economist, notes that “Lowering price growth so that income growth can catch up to prices is integral to improving housing affordability in B.C.”
The report suggests that an appropriate supply response can offset the negative impact on affordability from an immigration-driven demand shock, leading to a permanent improvement in affordability in B.C.
Immigration plays a crucial role in the economy by supporting economic growth, creating job opportunities, and bringing diversity to communities. However, as the report details, immigration also adds significantly to housing demand.
Governments can take steps to increase housing supply to ease the pressure on the housing market arising from sudden changes in demand, including zoning changes to allow for more housing construction, increasing funding for affordable housing programs, and providing incentives for developers to build more housing units.