VANCOUVER – An upward trend in housing prices isn’t expected to significantly change in British Columbia despite an anticipated slowdown in sales this year, economists say.
The B.C. Real Estate Association’s chief economist said Wednesday that new housing stock, slightly higher interest rates and tighter mortgage regulations will result in about a 10 per cent decline in sales compared with 2017.
But demand continues to outpace supply in most markets from Vancouver Island to the Okanagan, which spurs rising prices, Cameron Muir said.
“We would need a combination of a pretty substantial decline in demand as well as significant increases in overall residential supply in order to get to the point in which prices would decline,” Muir said.
Nationally, the Canadian Real Estate Association has said tighter mortgage regulations imposed on Monday, including a stress test for uninsured mortgages, would result in fewer sales and reduced prices by about 1.4 per cent to an average selling price of $503,100 this year.
Bryan Yu, economist with Central 1 Credit Union, said the changes may slow the pace of first-time buyers entering the market or lead to adjustments in what people choose to buy.
While this may slow sales, particularly in the first quarter of this year, he said B.C.’s growing economy and jobs will maintain a strong demand.
“I think the overall economic drivers are still there to support rising prices through 2018,” Yu said.
The Real Estate Board of Greater Vancouver said Wednesday the benchmark price for all residential properties was $1,050,300, in 2017, a 15.9 per cent jump from December 2016.
Sales of detached homes, townhomes and apartments reached 35,993 last year, the third highest total in a decade.
The board considers the sales total more “historically normal,” marking a 9.9 per cent decrease from 2016 and down 15 per cent from the sizzling pace of 2015.
A key aspect of last year’s housing market was a decline in the number of available listings, a trend the board has said can put upward pressure on prices.
Board president Jill Oudill said 54,655 properties were listed for sale in 2017, a dip of 5.1 per cent from the year earlier.
She also said market activity across the Vancouver region differed considerably in 2017 based on property type.
“Competition was intense in the condominium and townhome markets, with multiple offer situations becoming commonplace,” Oudill said in a news release.
The benchmark price of condominiums leaped 25.9 per cent in the Vancouver area last year, while townhomes increased 18.5 per cent and the price for detached homes climbed 7.9 per cent.
Prices have also soared in the neighbouring Fraser Valley with the benchmark price of condominiums jumping 40.5 per cent last year to $388,600.
The Fraser Valley Real Estate Association said the benchmark for single detached homes reaching $976,400, an increase of 14.2 per cent from 2016. The price of townhomes increased by 23 per cent.
Yu said rising prices means people will increasingly be left out of the housing market.
“We’re going to see an increase in renters in proportion to the population,” he said. “I think that’s going to be the natural evolution of this market over time.”
University of B.C. business professor Thomas Davidoff said governments could improve affordability by encouraging the development of more units in single-family home neighbourhoods and reforming taxes.
“We have high income and sales taxes and low property taxes and that says we encourage people not really to make a living and sell stuff here, but buy property. That’s the worst recipe ever for affordability,” he said.
Other factors, including political instability, interest rates or natural disasters, could drive down prices, Davidoff said. More likely, a major driver of prices will be what people are willing to pay.
“I do think in the long run, Vancouver will continue to be a very difficult place to buy or to rent unless you’re really rich,” he said.