Tighter mortgage rules are shifting property market: experts

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 the 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 do not 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 impacting 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.