Vancouver market frozen in its tracks

Home sales plummet, prices slide

The number of residential property sales in the greater Vancouver region fell by 5.6 per cent in 2016 — including a nearly 40 per cent year-over-year plunge in December alone — as governments took steps aimed at reining in red-hot real estate markets in parts of the country.

Figures released by the Real Estate Board of Greater Vancouver on Wednesday, however, showed that house prices have cooled by only 2.2 per cent over the past six months, with the MLS Home Price Index composite benchmark price of all residential properties in Metro Vancouver ending the year at $897,600.

“The spate of federal and provincial measures has seen the Vancouver market temporarily freeze in its tracks, as buyers and sellers both try to assess the implications for valuations ahead,” said Avery Shenfeld, chief economist at CIBC World Markets.

The interventions include a 15 per cent land-transfer tax on foreign buyers by the government of British Columbia. The federal government also made changes, including tightening qualifications for mortgage default insurance with the aim of ensuring homebuyers could manage their monthly payments at higher interest rates.

The Canada Revenue Agency is also hoping to curb speculation and foreign buying by auditing tax forms to ensure house sellers who claim a principal residence tax exemption actually lived in those homes.

Shenfeld said sales volumes in greater Vancouver are likely to revive at some point this year.

However, prices are expected to show “at least some lasting impact” from new tax measures aimed at foreign buyers, as well as government intervention designed to tighten the mortgage market, he said.

Still, he cautioned that market watchers shouldn’t read too much into the short-term trends, noting that Vancouver has experienced pricing dips that didn’t last.

“And its market has historically been more volatile than, say, Toronto,” Shenfeld added.

Dan Morrison, president of the Real Estate Board of Greater Vancouver, said the full impact of government and regulatory intervention taken in the latter half of last year won’t be fully understood “for some time.”

However, some market watchers expect this year to be pivotal.

“The macro-prudential moves taken by various levels of government to slow the acceleration of housing prices in Vancouver and other major markets in Canada are expected to have the desired effect in 2017,” David Beattie, senior vice-president in the Financial Institutions Group at Moody’s Investors Service, told the Financial Post.

The numbers released Wednesday by the Real Estate Board of Greater Vancouver showed a marked decline in sales volume in December from both the preceding month and a year earlier.

Residential property sales in the region totalled 1,714 in December, a decrease of 39.4 per cent from the sales recorded in December of 2015, and down 22.6 per cent from November of last year.

Last month’s sales were also 8.1 per cent below the 10-year sales average for the month.

Last year’s pullback came after 2015 year chalked up one of the two highest-selling years on record. The Real Estate Board of greater Vancouver noted that last year still marked the third highest-selling year on record — behind only 2005 and 2015 — with 39,943 detached, attached, and apartment properties sold in the region.