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On January 1, a new mortgage stress test was rolled out that many economists predicted would cool activity in Canadian housing markets. However, despite the stricter rules, home prices have continued to rise in Metro Vancouver and tight supply is to blame according to an economist from one of the country’s biggest banks.
In February, the benchmark price for all residential properties in Metro Vancouver was $1,071,800, a nearly 17 per cent increase from a year ago, according to the Real Estate Board of Greater Vancouver’s (REBGV) latest data, published this month.
Since the new mortgage regulations came into effect, RBC senior economist Robert Hogue says prices remain on the upswing in the region thanks to tight demand-supply conditions.
“The sales-to-new listings ratio, which is usually a pretty good gauge of tensions in the market, shows that sellers continue to have the upper hand in setting prices,” Hogue tells BuzzBuzzNews.
“It's not surprising to see that home pricing not only continues to rise but at an accelerating rate at least on a year-over-year basis,” he adds.
Last month, benchmark prices were up on an annual basis for all property types in the region. Condos saw the largest year-over-year price gain, by far, rising 27.2 per cent to $682,800 from February 2017.
Hogue expects the condo segment to experience continued price growth despite the mortgage rule changes and rising interest rates. He adds that condos are a more affordable homeownership option which will attract buyers who have reduced budgets thanks to the new lending requirements.
Although the new mortgage regulations appear to have had little effect on prices, Hogue says they are impacting resale activity in Metro Vancouver and across Canada.
"It has caused home resale activity to slow down quite a bit in both January and February,” he says.
In February, a total of 2,207 residential properties sold in Metro Vancouver, a nine per cent drop from the 2,424 sales recorded a year ago.
Over the coming months, Hogue expects a small amount of supply to enter Metro Vancouver’s market, with sales activity eventually picking up and prices stabilizing.
However, he adds that if interest rates continue to rise this year, Metro Vancouver’s eroding housing affordability issue “will become even more acute.”