B.C. Government measures designed to cool the Vancouver area housing market will take full effect in 2019, setting the stage for the continuation of sluggish sales.
A number of provincial policies, combined with federal stress tests that make it harder for borrowers, have had a major psychological effect on the Vancouver area, said Bryan Yu, deputy chief economist at Central 1 Credit Union. The Canadian banking regulator implemented a stress test on January 1, 2018, making it more difficult for buyers to qualify for a mortgage.
Sales in the Vancouver area declined by around 23 percent in 2018 compared to 2017. The very different trend of expectations between buyers and sellers is expected to expand to 2019, said Yu, who estimates that regional sales could drop 0.8 percent in 2019 compared to 2018.
"We will see an ongoing gap between what sellers want to sell and what buyers can and want to bid for property," he said in an interview. "It's very much leading to a low sales environment."
The NDP provincial government will start collecting what he calls speculation taxes in 2019. The annual tax is mostly aimed at residents outside the province who own property in the urban market of British Columbia. These assets tend to be secondary homes or vacation properties that are not rented out.
B.C. The government will also start imposing annual taxes targeting homeowners from properties valued at more than $ 3 million. New speculation taxes and additional taxes are part of a broad housing policy package that was initially announced in the BC NDP budget in February, 2018.
While the affordability crisis continues, the average price for separate homes, condominiums and townships in the Vancouver area can decrease by 3 percent in 2019 compared to 2018, Yu estimates. He added that sluggish sales trends and flat or slightly lower prices could continue until 2020 and 2021.
In August 2016, the Liberal SM government previously imposed a 15 percent tax on foreign buyers in the Vancouver area, contributing to a decline in separate housing segments during the second half of 2016 and early 2017. Following a choppy recovery in the housing market in 2017, the BC NDP government raised buyer taxes foreigners to 20 percent in February, 2018, and also expand taxes to other urban markets in the province.
The Vancouver real estate market faces "strong pressure" for much of 2018, exacerbated by rising mortgage rates, said Bank of Montreal senior economist Sal Guatieri.
"Demand has weakened so much that some buyers out there can now get some price concessions from sellers," Royal Bank of Canada economists Craig Wright and Robert Hogue wrote in a research note.
However, Mr Yu said the British Columbia economy is expected to remain strong over the next three years while the unemployment rate must remain relatively low, and there are no signs that shadowing global financial shocks.
"House prices are being eroded, but they will not fall," he said. "We have reached a weak point in the housing sector, and that is really an event caused by policy. The labor market is strong. We are not in an economic recession or in a crisis of trust. "
The average price for separate homes sold on Vancouver's west side reached $ 3,218,333 in November 2017. Separate average prices have dropped 11 percent since then, but are still beyond the reach of most prospective buyers with $ 2,860,000.
The market for condominiums and city houses showed signs of resilience in early 2018, although softened in recent months. Prices for condominiums sold in Greater Vancouver averaged $ 690,190 in November, down 7.7 percent since April.
But even entry-level condos remain too expensive for many first-time buyers, said Paul Kershaw, founder of Generation Squeeze, a lobby group formed to represent the views of Canadians in their 40s and younger. "The prospect of home ownership for the younger demographic is more disadvantaged in British Columbia than in any other province," he said.
The rapid rise in real estate prices from mid-2013 to mid-2016 in the City of Vancouver encouraged many residents to move elsewhere in the province, helping to raise prices in markets such as Victoria and the Sunshine Coast, said Mr. Kershaw.
An analysis by Generation Squeeze found that the rate of home ownership in British Columbia for residents between the ages of 35 and 44 years was 67 percent in 2016, compared with 78 percent in 1977.
"We experienced an earthquake effectively in the SM real estate sector," said Mr. Kershaw. "This is not only a Vancouver problem because over the past decade, it has spread to the suburbs and gone to other city centers like Victoria. Even if you save enough for a down payment, hard work doesn't pay off as before. "