6 March 2018

“Higher interest rates and mortgage rules tightening reduced home buyers’ purchasing power, especially at the entry level of the market,” – Jill Oudil, president of the Real Estate Board of Greater Vancouver, said.

As you know, in January, the Office of the Superintendent of Financial Institutions introduced mortgage rules, requiring from borrowers with uninsured mortgages to prove they can withstand a potential rate increase.

In addition to it, the central bank raised its key lending rate three times since the last summer. It led to higher costs of variable-rate mortgages and even to growth in new fixed-rate mortgage costs, as yields on the bond market also rose.

“However, the supply of apartments and townhouses still can’t absorb the strong demand,” – Oudil noted

“On the other hand, we can see detached home market entering the buyers’ market territory.”

Last month, the sales-to-active listings ratio for townhouses and condos was 37.6% and 59.7%, respectfully. Meanwhile, detached homes showed 13%.

It’s important to understand that downward pressure on real estate prices appears when the ratio falls below 12% for a long time, and the upward pressure occurs in case it exceeds 20%.

The average cost of a detached house in February stayed almost unchanged from January at $1,602,000. Condos showed a monthly increase by 2.6% to $682,800 and townhouses reported a 1.9% hike to $819,200.

As a rule, spring is the most active season for buyers and sellers, says Oudil, noting that the board will watch how they react to the new rules and taxes from provincial and federal governments.

Earlier, British Columbia released its provincial budget including a new housing plan aimed at improving real estate affordability.

The plan raised the foreign buyers’ tax from 15% to 20% and expanded it from Metro Vancouver to the Fraser Valley, Central Okanagan, the Nanaimo Regional District and the Victoria area. Such changes are already active.

Moreover, this fall, the government will also implement a speculation tax, affecting foreign and domestic homeowners who don’t pay income tax in this province.