Photo: Christopher Porter/Flickr
The British Columbia Real Estate Association (BCREA) anticipates a sharp decline in home sales and relatively flat prices this year before the market begins recovering in 2019.
In its 2018 Third Quarter Housing Forecast Update, BCREA predicts 82,000 homes will change hands in the province this year, down 21 per cent from the 103,768 transactions recorded through MLS systems in BC last year. Residential sales in BC have averaged 84,800 annually over the past decade and are projected to rebound in 2019 by 8 per cent.
Greater Vancouver sales are expected to fall by 25.7 per cent this year and then surge 13 per cent the year after.
Northern BC, which includes Prince George — recently named BC’s top major market for affordability — appears to be the only market poised for an uptick in activity this year. BCREA calls for activity to finish the year up 1.9 per cent. In 2019, growth of 7.4 per cent is forecast.
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Realtors estimate the average price for a Vancouver home will increase 1.9 per cent to $1,050,000 for 2018 and an additional 3.3 per cent over 2019.
In fact, BCREA suggests all 11 member boards will see prices grow over the next two years. The association expects the average price for BC homes in 2018 to inch up 1.9 per cent to $723,200 before climbing 5.3 per cent to $761,600 the following year.
“The BC housing market is grappling with a sharp decline in affordability caused by tough B20 stress test rules for conventional mortgages,” says Cameron Muir, BCREA’s chief economist, in a news release.
Starting this year, stress testing was expanded to include uninsured mortgages from federally regulated financial institutions.
That move was part of Guideline B-20, the series of rules drafted by federal lending watchdog the Office of the Superintendent of Financial Institutions.
To pass the stress test, the borrower has to qualify at the Bank of Canada’s five-year benchmark rate or a rate 2 percentage points over their contractual rate, whichever of the two is higher.
“While these rules have had a negative effect on housing demand across the country, the impact has been especially severe in BC’s large urban centres because of already strained housing affordability,” BCREA’s Muir continues.
As sales have slowed, inventory levels have risen. The number of active listings surged 19.1 per cent in July compared to the number of homes on the market at the end of the same month a year prior.
“We’ve seen inventory creep up since the beginning of the year, albeit we’re coming from a decade low on the inventory side,” Muir observes in a followup interview.
Although the increase in listings has weighed on price growth, BCREA once more notes factors that have somewhat cushioned prices from knockon effects of fewer sales and more robust supply levels.
“Demographics are highly favourable, especially the millennial generation who are now entering their household-forming years. In addition, low unemployment is leading to significant upward pressure on wages and, by extension, household wealth and confidence,” writes BCREA in the news release.