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Keith Baldrey: Population rise stokes superheated housing market

Accelerated immigration outweighs any drag from interest rates, inflation on prices, sales.
Home prices in B.C. continue their relentless climb despite high interest rates and the rising cost of living.

Canada’s national population punched through the 40 million level last week, and while that may help fuel economic growth, a rising population also brings some serious challenges with it.

When so many more people are residing in Canada, our public health care system sags under the increased weight placed upon it, and our housing affordability problem stubbornly shows no signs of abating as the rising population fuels demand.

Last week, for example, Central 1 Credit Union’s economic briefing for May showed that average house prices in B.C. rose by 5.1 per cent over the previous month, pushing the average price of a home to slightly more than $1 million (the average price in Metro Vancouver is now $1.28 million).

So even rising interest rates and a significant increase in the cost of living are not bringing down housing prices, or sales either.  Central 1’s report also showed a 5.8 per cent increase in sales last month.

Surely, the steady increase in our population is outweighing any effect on the housing market brought by the two factors of interest rates and inflation.

How else to explain a seven per cent increase in housing prices in places like the Fraser Valley, where the population is growing at a rapid clip?

B.C. government statistics forecast that the Fraser Health region’s population alone will increase by 35 per cent between 2018 and 2038, adding almost 700,000 new residents over that time span.

Province-wide the population is expected to rise by 27 per cent, reaching about 6.5 million people by 2038.

Not only will that population explosion likely keep sustained pressure on the housing market, but it will also put enormous pressure on the health-care system, particularly because the number of people over the age of 64 ― when health-care problems begin to mount ― is forecast to skyrocket in number.

Across B.C., the senior population is expected to increase by 71 per cent in that time period, but in Fraser Health the increase is forecast to be about 95 per cent.

What’s driving our population growth?

B.C.’s population grew by about 150,000 last year, and that is almost all international migration. We currently sit at about 5.4 million residents, up from 5.1 million in less than four years.

The Trudeau government decided a few years back to greatly increase the annual level of immigration, ostensibly to nullify a growing worker shortage.

Last year, across the country almost a half million people achieved permanent resident status, and the federal government hopes to keep that number rising through 2025 and beyond.

Don Wright, the former head of the B.C. civil service under former premier John Horgan, recently wrote in The Orca of the problems associated with such a population explosion, and noted that 95 per cent of new British Columbians are settling in Metro Vancouver, south Vancouver Island and the Okanagan, where affordable housing is already in short supply.

“The net result? Premier Eby is going to have even more difficulty in delivering more affordable housing,” Wright wrote.

It’s hard to disagree with that statement.

The fact that more than one million more people are expected to come to B.C. over the next 15 years underscores the need for innovation and planning in many areas of public policy.

And with the federal government playing such a key role in our phenomenal population growth, look for the provinces to demand more from it to meet these rising challenges, particularly when it comes to health care and housing.

Keith Baldrey is chief political reporter for Global BC.

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