Photo: Jeff Hitchcock/Flickr
It’s been a rough year for BC’s housing market as it faced a one-two punch from tighter mortgage regulations and higher interest rates, both of which have left many potential buyers feeling the pinch.
While a new report from financial-services company Central 1 Credit Union says the resale housing segment “looks to have finally turned the corner” that assessment shouldn’t buoy readers too much.
Even though the market’s performance isn’t expected to grind the province’s economic growth to a halt, it’s not exactly anticipated to prop it up either, and the new-home market poses potential challenges for the economy as well.
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“While the resale market is no longer a direct drag on growth, the sluggish environment will slow future economic activity,” writes Bryan Yu, Central 1’s deputy chief economist, in the report.
Central 1 notes that 6,370 existing homes changed hands across the province in August, up 2 per cent from July and representing the second consecutive month-over-month increase. However, annually, activity remained down more than 25 per cent.
“Momentum matters and sales weakness is eroding prices in various markets,” says Yu.
In the Lower Mainland, where much of BC’s housing activity is concentrated, Central 1 projects home values will drop by a further 5 to 7 per cent, with detached home prices leading the march downwards. In the smaller markets that dot the area outside the Lower Mainland, modest price gains are expected thanks to a solid provincial economy.
“Mortgage stress test measures are less of a barrier due to lower price levels,” says Yu, adding, “Rising interest rates will be a headwind.”
A recent report from Scotiabank stated that strong inflation and real estate figures would support the Bank of Canada pursuing more rate hikes.
The Central 1 publication goes on to suggest the new-home market will have more of a negative impact on the economy than its resale counterpart.
“Slower sell-through of pre-sales will curtail housing starts, detracting from the contribution of construction to economic growth,” Yu adds.
Earlier this month, Central 1 warned that forthcoming completions may lead to inflated listings as pre-sale investors look to flip units purchased in previous years.