Photo: Mat Hamson/Flickr
If Western Canada’s energy sector continues to struggle into the new year, it could have positive implications for the Vancouver housing market.
For obvious reasons, real estate markets in Calgary and Edmonton are more closely tied to goings on in Alberta’s oil patch. But there are knock-on effects for other markets, including Vancouver, suggests Adil Dinani, a local realtor with Royal LePage.
“If we see a more suppressed resource market in the first quarter, we may not see the Bank of Canada move rates,” Dinani tells Livabl. “We all know oxygen for the real estate market is low interest rates,” he adds.
Housing Market News Alerts
Sign up now for news alerts on the Vancouver housing market
Since July 2017, Canada’s central bank has five times hiked the overnight rate, which influences mortgage rates. But today the bank put the breaks on increases, at least for now, maintaining the rate at 1.75 percent in a widely expected decision. In its statement accompanying the announcement, the Bank of Canada highlighted how “oil prices have fallen sharply” since October.
Should the central bank continue holding the rate, that could mean a tepid, but not hot, resale housing market in Vancouver come the spring, Dinani notes.
The Bank of Canada does appear to be poised to move rates higher. In addition to calling attention to oil industry struggles, the bank’s statement noted “the policy interest rate will need to rise into a neutral range to achieve the inflation target.”
Dinani emphasizes that the overnight rate is just one factor influencing Vancouver’s housing market and that a suite of others have pull. Specifically, expanded mortgage stress testing has eroded buying power for some. Since January, many uninsured mortgage applicants have had to qualify at higher interest rates than they are applying for despite putting down 20 percent downpayments.
Meantime, the foreign-buyer tax of 20 percent has the luxury segment “really feeling the pain,” says Dinani. “Imagine taxing somebody on a $3-million purchase,” he adds. “You have to pay a $600,000 tax.”