According to the latest Housing Forecast Update released by British Columbia Real Estate Association (BCREA), residential sales across the province are expected to decline by 21% year-over-year, at the end of 2018.
The biggest impact on sales activity, according to BCREA, is the new mortgage stress test that came into effect on January 1, 2018. According to this latest regulation, all buyers and homeowners looking to refinance or renew with a different lender must now qualify for the mortgage based on the five-year posted rates — rates that are, quite often, two-hundred basis points above current discount rates offered by banks and mortgage lenders. According to BCREA, the impact of this stress test has had a profound effect on B.C.’s residential real estate sales activity, particularly in Vancouver, West Vancouver, Richmond and the Tri-Cities (which include Coquitlam, Port Coquitlam and Port Moody). BCREA predicts the impact of this stress test will continue into 2019.
What’s frustrating for those in the real estate business is that B.C.’s economy continues to hold strong with the province boasting one of the lowest unemployment rates in the country. Problem is the infamously high cost of living in the Lower Mainland means that there isn’t much room for sustained growth. After four years of GDP growth over 3%, BCREA expects B.C.’s economic growth to finally slow down, but not by much. BCREA is predicting a drop to 2.8% in 2018 and 2.5% in 2019.
“Even the supply-strapped Vancouver market has experienced a 30% increase in active listings over the past year.”
The good news for buyers (and sellers) is that the province’s low unemployment has led to an upward trend in wages, household income and buyer confidence, particularly among millennials, who continue to look for ways to enter the real estate market. This is good news for sellers. According to the BCREA report, the number of active listings in the province is up by 20% in July, which has helped to offset BC’s chronic supply shortage.
“Even the supply-strapped Vancouver market has experienced a 30% increase in active listings over the past year. The combination of slower housing demand and an increase in the inventory of homes for sale has trended most markets toward balanced conditions,” write BCREA report authors. “This means more selection for home buyers, fewer multiple offer situations and less upward pressure on home prices.” But for now, sellers should brace themselves for a clawback on the sky-is-the-limit prices that made headlines in 2016 and 2017.