New mortgage rules, rising rates dampen B.C. real estate sales
VANCOUVER Three months into B.C.’s experience with tighter mortgage qualification rules, layered in with provincial real estate tax changes, property markets are starting to shift.
However, parsing out whether the provincial measures — the speculation tax on second homes, school surtax on expensive homes and raising the property transfer tax — are having a big, small or any impact on the housing market is an open question.
“When we look at the overall downturn we’ve seen in the market, I don’t see it being at all attributable to provincial measures,” said Cameron Muir, chief economist for the B.C. Real Estate Association.
Muir said the declining demand, especially in the Lower Mainland, “is entirely attributable” to new mortgage qualification rules, higher mortgage rates and already high prices that have reduced the purchasing power of first-time buyers.
And he argued that some of the other tax measures, such as the foreign buyers tax and Vancouver’s empty homes tax, will apply to too few homes to make a difference to housing affordability.
In May, both of the Lower Mainland’s major real estate boards saw sales fall 35 per cent below levels of the same month in 2017.
For the Real Estate Board of Greater Vancouver, that was 2,833 sales in May compared with 4,364 a year ago. In the Fraser Valley, the numbers were 1,758 versus 2,707. And in both areas, inventories of unsold homes rose.
However, with so many factors, including the new federal-level mortgage rules and new provincial taxes, others argue it’s more of a challenge to sort out.
Tom Davidoff, an associate professor in the Sauder School of Business at the University of B.C., said tighter mortgage qualification rules are definitely affecting firsttime buyers.
However, the effect of the new tax measures by the province and the City of Vancouver also make it more challenging for buyers to calculate what they should be willing to pay.
“On a month-by-month basis, I have no ability to say in particular which of those smoking guns shot the bullet that led to the change in (sales) activity,” Davidoff said.
B.C.’s recreational property market is one area where owners can expect a dent in the values of their properties, depending where they are, according to a major realty firm, which points directly at the provincial speculation tax.
Royal LePage, in its annual recreational property survey, estimated that, on average, the province’s vacation property prices will dip 2.8 per cent in 2018 as out-of-province owners put properties on the market, increasing inventories.
“Essentially, it is a tale of two markets,” said Royal LePage realtor Adil Dinani.
Those regions of B.C. now captured by the expanded B.C. speculation tax, which was intended to target foreign owners who leave homes empty, can expect to see a short-term pullback in sales, and a deflation in prices. That includes Kelowna and West Kelowna in the Okanagan, and the Sunshine Coast.
However, for the Gulf Islands and Qualicum Beach, where the tax doesn’t apply, it should be “business as usual,” Dinani said.
Regardless of whether the provincial tax measures are having an effect right now, they remain popular moves, according to a new poll by the Research Co. That survey, of 800 British Columbians polled between May 27-29, found that 67 per cent of respondents believed that the province’s surtax on homes worth more than $3 million and $4 million was “very good” or “good.”
Support for expanding the speculation tax outside Metro Vancouver garnered the support of 76 per cent of respondents. The margin of error on the poll is plus or minus 3.5 per cent, 19 times out of 20.
“It has been handled well and there is definitely a lot of popular support for all these measures at this particular stage,” said Research Co. president Mario Canseco about a public that simply wants to see action on the housing front.
Canseco said the NDP government’s measures even score well with Liberal voters.
However, in six months to a year, if government can’t show voters, especially millennials trying to get into the housing market, that the measures are helping people get into that market, the story will change.