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Stricter mortgage qualification rules that came into effect at the start of the year continued to take a bite out of home sales activity in BC for a seventh straight month, says the British Columbia Real Estate Association (BCREA).

Some 7,055 homes changed hands throughout the province in July, a decline of 23.9 per cent from that time last year, according to BCREA’s latest Statistical Release, published this week.

“The impact of the B-20 stress test… has had a pretty considerable impact on consumer demand,” Cameron Muir, the association’s chief economist, tells Livabl in an interview.

On January 1st, new mortgage rules drafted by the Office of the Superintendent of Financial Institutions, the federal watchdog tasked with monitoring the country’s financial institutions, were introduced.

Known as Guideline B-20, the rules included expanding mortgage stress testing to all uninsured mortgages, instead of only insured mortgages for borrowers who put forward downpayments of less than 20 per cent.

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To get approval for a mortgage under the expanded stress test, at minimum a borrower has to qualify at a rate greater than the Bank of Canada’s five-year benchmark or a rate 2 percentage points above the actual mortgage they are applying under, whichever is higher.

Ever since the B-20 guidelines were introduced, sales activity across BC has been in decline, Muir confirms. But while on a year-over-year basis sales were down sharply in July, home prices remained roughly at the level they were a year ago.

Last month, the average price for a home in the province was $695,990, just 0.4 per cent shy from July 2017. “A lack of supply… continues to keep markets in relative balance,” explains Muir. Fundamentals, such as wages and the economy, are also supporting demand, he says.

Previously drum-tight inventory levels have insulated the provincial market from the effects of more recent spikes in supply, like July’s 19.1 per cent year-over-year rise in active listings.

For example, as recently as earlier this year, the number of active listings in Victoria sunk to a 35-year low.

But it may be some time before the market has fully adjusted to the impacts of the regulatory move.

“The expectation is that sales will see some recovery in the coming quarters as the impact of these policies has historically lasted a few quarters until we start to see some recovery,” Muir says.

“I think this time it may take a little bit longer to recover or show some signs of recovery,” he adds.

At this point residential sales in BC are lagging last year’s by 20.6 per cent, with 50,926 transactions recorded from the beginning of January to the end of July.

However, the average sale price of $725,639 over that period is up 2.1 per cent compared to what was observed through the same timeframe last year.

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