Home sales in B.C. dropped by a quarter in 2018, with analysts blaming tighter mortgage restrictions.
According to the B.C. Real Estate Association, about 78,000 home sales were recorded last year, compared to roughly 103,700 the year before.
“The sharp decline in affordability caused by the B20 mortgage stress test is largely to blame for decline in consumer demand last year,” said Cameron Muir, the association’s chief economist, in a news release Tuesday.
The federal government enacted strict mortgage rules on Jan. 1, 2018, including a new stress test for home buyers as a way to cool off the hot real estate market.
But the dip in the number of sales had no dent in the average price of a B.C. home, which increased by 0.4 per cent last year to $712,508.
Nationwide, excluding Greater Vancouver and the Greater Toronto Area – the most active and expensive markets – the average annual sale price was just under $375,000.
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B.C.’s dip in sales mirrored the rest of the country, which saw the weakest annual sales since 2012.
“The stress-test has weighed on sales to varying degrees in all Canadian housing markets and will continue to do so this year,” Canadian Real Estate Association president Barb Sukkau said in a news release.
But while the province’s average housing price increased, Canada overall faced an average decrease of 4.9 per cent.
BMO Capital Markets senior economist Robert Kavcic took the drops to be signs that the market has softened and “the headline-grabbing drama in recent years has largely run its course.”
“It’s probably not a stretch to think that the Canadian housing market has entered into a prolonged period of relative stagnation, where sales are roughly flat and prices no longer outrun inflation,” he wrote in a note to clients.
“This would be a big change compared to conditions we’ve experienced over the past decade, especially in Toronto and Vancouver, but it’s not at all uncommon when looking back through history and across different markets.”
Vancouver, he pointed out, finished the year at the lowest seasonally adjusted level since the Great Recession, leaving buyers in control.
Looking ahead, TD Bank economist Rishi Sondhi predicted declines seen in December will weigh on residential investment and overall economic growth across all markets.
“Our forecast calls for Canadian sales to basically tread water after 2018’s plunge, as the impact of rising borrowing costs and tighter lending conditions are countered by strong population gains and on-going job growth,” Sondhi said in a note to investors.
“Still, the level of sales will remain relatively low compared to recent years.”
With files from Tara Deschamps, The Canadian Press
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