Photo: Guilhem Vellut/Flickr
The worst may be over in terms of plummeting resale activity in BC, but the provincial housing market isn’t exactly ripe for recovery, suggests a report from Central 1 Credit Union.
“Activity has stabilized since June and is trending at a level last observed in 2014,” explains Bryan Yu, Central 1’s deputy chief economist, in the credit union’s latest B.C. Economic Briefing.
In total, 5,580 homes changed hands throughout BC this September, down 33 per cent from last year, according to the British Columbia Real Estate Association. The total number of transactions recorded over the first three quarters of the year was off by 22 per cent when compared to the same period last year.
However, on a seasonally adjusted basis, activity was “virtually unchanged” compared to August, notes Yu. But for more than one reason, the housing market will face a number of headwinds, keeping activity in check. “Subdued market conditions will continue as federal and provincial policies couple with rising interest rates to limit demand,” Yu outlines.
On the federal policy front, Yu says “the initial shock” to the market caused by B-20 lending guidelines introduced at the start of the year is over. But the regulations “have permanently lowered sales, particularly in higher-priced urban markets like Vancouver.”
The guidelines from the Office of the Superintendent of Financial Institutions, an independent government watchdog and regulator, expanded stress testing to uninsured mortgages. Previously, borrowers could sidestep the stress testing by putting forward a downpayment of 20 percent or more.
“Prospective homeowners, especially entry-level buyers, are less likely to able to bridge the drop in purchasing power caused by the higher mortgage qualification rates,” Yu adds.
Other hurdles for the market include the increased foreign-homebuyer tax and the forthcoming speculation tax for Metro Vancouver and a number of its environs. Announced earlier this year, BC’s NDP government last week tabled legislation for the speculation levy.
“Home values are expected to decrease, particularly in the Metro Vancouver area,” says Yu referring to fallout from policy moves and higher interest rates.