Photo: Ruth Hartnup/Flickr
The housing recession that is sweeping across the Vancouver area will leave home prices 12 percent below the peak achieved last June, an economist predicts.
If the forecast from Bryan Yu, Central 1 Credit Union’s top economist, proves correct, that would mean a loss of more than $100,000 from the all-time high.
In June 2018, the benchmark price of a Lower Mainland home reached an unprecedented $1.034 million. Yu anticipates that when all is said and done the price will bottom out around the $900,000 mark for the area including Greater Vancouver and the Fraser Valley.
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“The decline pushes values to the lowest levels since early 2017, although there is downside risk,” Yu writes in a recent report that spells out how dire the situation in Canada’s most expensive real estate market has become.
According to Yu’s analysis, home sales across Metro Vancouver and the Abbotsford–Mission area totalled 3,158 this April, down 25.5 percent from the same month last year. April activity hasn’t been so weak since the year 2000.
“While a slight improvement from the near 30 per cent drop in March, the sales flow continued to deteriorate. Our seasonally-adjusted estimates point to a two per cent monthly sales decline from March, marking a seventh consecutive decline and slowest pace since the 2008/09 financial crisis,” Yu writes.
The market’s tailspin is the result of policy decisions, Yu says, echoing the view of major local industry groups the Real Estate Board of Greater Vancouver as well as the British Columbia Real Estate Association.
“The current slump is likely to persist. Despite a solid growth in the local economy and population, federal stress tests and provincial policy measures will continue to hamper sales,” Yu says.
Federal policymakers imposed a “stress test” on uninsured mortgage borrowers last January, raising the bar to homeownership.
Under the new rules, borrowers who put forward a downpayment of at least 20 percent — the minimum for an uninsured mortgage — have to qualify at a mortgage rate that is 2 percentage points higher than what their federally regulated lender is offering.
Stress testing had already been introduced for the insured mortgage segment back in 2016.
While that policy has had an impact nationally, there are a number of policies that are unique to British Columbia.
A foreign-homebuyer tax for Metro Vancouver was increased to 20 percent last year, up from the 15-percent rate that was established in August 2016.
The BC government has also slapped speculation and vacancy tax on major urban markets, while the City of Vancouver has its own levy on empty homes.
“For sellers staying in the market, current conditions warrant further price cuts,” Yu writes.