Photo: Duncan Harris/Flickr
The lead-up to the holiday season wasn’t a cheery one for BC’s housing market, and a festively worded report suggests the slowdown in activity may have been even frostier than the numbers indicate.
“B.C. housing markets received a lump of coal heading into the holiday season as B.C. MLS home sales fell sharply in November,” writes Bryan Yu, deputy chief economist of Central 1, in the credit union’s latest B.C. Economic Briefing.
In November, BC home sales plunged 33 percent compared to the same month last year. But the drop may have been even more pronounced if not for an uptick in sales last year spurred by a looming government policy change, Yu notes.
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“Prior year sales were inflated by buyers looking to purchase before the implementation of the federal government’s mortgage ‘stress tests’ in January,” Yu explains.
In January this year, federal lending rules were introduced to extend stress testing to uninsured mortgages. The changes mean that even with a 20-percent downpayment, a mortgage applicant still needs to qualify at a higher rate than they are signing on for. This has significantly reduced the purchasing power of some consumers.
But it’s not the only reason sales across the province are trending lower. “Several factors are weighing on sales volumes,” Yu says. “Provincial measures — such as the introduction of the speculation and vacancy taxes and higher interest rates — have also constrained demand.”
Not only that, but a weaker economy in neighbouring Alberta could be limiting demand in some of BC’s inland markets.
Overall, the average selling price in November for a home in BC was $724,689, representing an increase of 1.5 percent from October but remaining 2 percent shy of year-ago levels. “Further erosion in home values are anticipated,” says Yu, echoing Central 1’s recent provincial forecast.