As British Columbia’s housing market is experiencing a quicker than expected rebound after a period of cooling, one big bank has boosted its housing market forecast to reflect the rise in activity.
According to RBC’s latest housing market forecast published on Tuesday, the bank adjusted BC’s expected decrease in annual resales for this year and increased the price profile.
“We did expect some rebound from this policy-induced slowing that we’ve seen last year but we didn’t expect it to happen that quickly,” RBC Senior Economist Robert Hogue tells BuzzBuzzNews.
The province’s formerly red-hot market showed signs of cooling off, driven by a slowdown in activity in Metro Vancouver after the BC government implemented a 15 per cent foreign-buyer tax for the region in August 2016.
The levy was meant to slow foreign buyer activity in Metro Vancouver and, according to the BC government’s latest data, the measure did appear to have an immediate effect.
From June 10th to August 1st, 2016, roughly 13 per cent of residential transactions in Metro Vancouver involved foreign nationals.
However, after the tax was introduced the percentage of foreign buyers in Metro Vancouver dropped significantly to approximately one per cent in August 2016. The rest of BC saw only a slight decrease in foreign buyers after the tax took hold.
According to the BC government’s data, foreign buyer activity in Metro Vancouver slowly picked up again since April 2017, ending the policy-induced cooling off period.
Province-wide, foreign buyers accounted for 2.7 per cent of sales from August 2nd, 2016 to May 31st, 2017, and during the same time, foreign nationals were involved in 2.8 per cent of sales in Metro Vancouver.
Real Estate Board of Greater Vancouver (REBGV) President Jill Oudil says it’s too early to tell if the levy did indeed have a substantial impact on the region’s market.
“The one thing that we definitely can see is that taxes don’t increase the supply but it seems, from the data we have available, the foreign buyers may have gone down slightly,” Oudil tells BuzzBuzzNews.
RBC’s Hogue says the levy had a significant effect on the market slowdown, as people cautiously waited on the sidelines to see how the measure played out.
But now, Hogue says homebuyers are deciding to re-enter the market, causing home sales and prices to edge upwards.
To bring it in line with the changing market, RBC slightly amended its BC forecast and now expects the province to make a small annual gain this year.
“I think before we had it relatively flat in turn on a year-over-year basis for the full 2017, relative to 2016,” says Hogue.
“Now we bumped it up a bit to a small increase, but the general picture is still pretty much the same,” he adds.
The financial institution forecasts the aggregate price of a home in BC will be $747,200 this year, a 2.3 per cent increase from 2016.
Additionally, a total of 99,400 homes are anticipated to change hands this year in BC, down 11.4 per cent from last year.
As for the province’s market in 2018, Hogue says it will be heavily impacted by a change in interest rates, which RBC predicts will rise from record-low levels starting this month.
“The story for 2018 is one of interest rates,” says Hogue.
“This is true for BC and it’s true pretty much across Canada. We do expect that interest rates will rise,” he adds.
In its latest forecast, RBC anticipates that there will be a total of 91,600 home sales in BC next year, down 7.8 per cent from 2017. Meanwhile, home prices are expected to jump 1.5 per cent year-over-year to $758,500 in 2018.