According to a forecast issued November 28 by the BC Real Estate Association (BCREA), rising interest rates and a tough mortgage stress test will combine to reduce home sales in the province next year.
The association predicts that, following BC home sales falling by 8.8% in 2017 compared with last year, resale transactions will decline a further 10.4% in 2018, to around 91,700 units sold across the whole year.
The BCREA reported that “strong economic and demographic fundamentals are supporting elevated housing demand," and noted that is 10-year average for home sales in BC is 84,700 units per year.
They indicated that two key factors will bring home sales down to between 2014 and 2015 levels:
“Housing demand across the province will face increasing headwinds in 2018," said Cameron Muir, BCREA’s chief economist. "A rising interest rate environment combined with more stringent mortgage stress tests will reduce household purchasing power and erode housing affordability. Given the rapid rise in home prices over the past few years, the effect of these factors will likely be magnified."
Although home prices are not expected to decline in 2018, average price rises will be less steep than we saw in our hot markets in 2015 and 2016. Residential resale prices in BC are forecast to be 3.1% higher this year than last year, at an average of $712,300, and to rise a further 4.6% to $745,300 in 2018.
It should be noted that these price-rise predictions are expected to vary considerably across the province, with Greater Vancouver’s average home prices expected to rise 5.5% in 2018, and Victoria’s just 1.4%.
One key driver in our recent price increases? This report indicates that "the imbalance between supply and demand has been largely responsible for rapidly rising home prices.”
But it added, “The combination of weakening consumer demand and a surge in new home completions next year is expected to induce more balanced market conditions, producing less upward pressure on home prices.”
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