Real estate prices in Greater Vancouver and the Fraser Valley continued to decline in June, as has the sales rate for presale condos in those regions. However, areas of Northern BC and Vancouver Island are experiencing gains in resale prices and strong sales. There are some indications that the declining markets may see a comeback in the coming months due to the drop in interest rates for five year fixed mortgages and the Bank of Canada’s loosening of the mortgage stress test. Some experts are warning that these two changes could also lead to a resurgence of overseas real estate speculation and drive home prices higher.

IN THE NEWS

While the real estate market in Greater Vancouver and the Fraser Valley continued to decline in June this year, Prince George and Kitimat as well as Vancouver Island and Victoria have all experienced some gains. Home resale prices in Northern B.C. were up nine per cent year over year. Victoria’s resale prices declined slightly but it is still in a strong seller’s market, with a sales-to-active-listings ratio of nearly 29 per cent. Vancouver Island home sales are down on an annual basis, but average resale prices are still rising, up nearly five per cent year over year.1

The Greater Vancouver and Fraser Valley sales rate for presale condos fell to 14% in June, the lowest it has been since 2012, with buyers signing sales contracts for only 73 out of 519 units on the market.  By comparison, when the market was hot, many projects sold contracts for 90% or more of their units within a few months of marketing.  Some developers are holding back on presale launches as they are not certain they can meet the presale requirements for bank financing.2

Some analysts are predicting that the decline in the real estate market may be reversed in the coming months as mortgages may become more affordable due lower interest rates and some loosening of the Bank of Canada’s requirements for the mortgage stress test.  With bond yields falling, lenders are offering interest rates of as low as 2.36% on a five year fixed rate mortgage.  These rates are inline with the interest rates offered at the market’s peak in 2018.  The Bank of Canada has dropped the qualifying rate for the mortgage stress test to 5.19%.  These two factors combined give prospective buyers more purchasing power at a time when housing prices are falling.  However, Douglas Porter, BMO’s chief economist has warned that lowest interest rates could also result in a resurgence in overseas speculation in Canadian real estate that had fallen off due to the foreign buyers tax implemented in Vancouver and other major cities and commented that “Domestic policymakers [in Canada] may need to consider other ways to control [real estate] speculation – especially from abroad – in a world where interest rates stay below inflation, or even below zero.”3

STATS AT-A-GLANCE

BC UNEMPLOYMENT RATES 4
Regions Rate from July 2019 to August 2019 Rate from June 2019 to July 2019
Northern B.C. 9.0% 9.2%
Southern Coastal 6.4% 6.1%
Southern Interior 6.3% 6.7%
Vancouver 4.1% 4.1%
Victoria 4.6% 4.9%

Table source: http://srv129.services.gc.ca/ei_regions/eng/rates_cur.aspx

REAL ESTATE ACTIVITY (RESIDENTIAL) BY REGION

Greater Vancouver 5

  • Units sold: 23.5% increase from July 2018
  • Active listings: 17.3% increase from July 2018
  • New listings: 3.3% decrease from July 2018
  • Benchmark price: $1,417,0.00 (10.5% decrease from July 2018)*

Victoria6

  • Units sold: 8.4% increase from July 2018
  • Active listings: 13.1% increase from July 2018
  • Benchmark price: $858,800 (3.4% decrease from July 2018 for detached homes)*

Fraser Valley7

  • Units sold: 13% increase from July 2018
  • Active listings: 12.7% increase from July 2018
  • New listings: 4.2% decrease from July 2018
  • Benchmark price: $957,400 (6.3% decrease from July 2018 for detached homes)*

Okanagan/Shuswap/Revelstoke8

  • Units sold: 8.3% increase from July 2018
  • Active listings: 6.0% increase from July 2018
  • New listings: 9.23% decrease from July 2018
  • Average residential price: $576,290 (8.39% decrease from July 2018)

Northern BC9

  • Units sold: 4.5% increase from July 2018
  • Active listings: 5.9% increase July 2018
  • New listings: 0.1% increase from July 2018
  • Average residential price: $305,313 (0.1% decrease from June 2018)

*Benchmark based on the MLS HPI® benchmark for single family detached homes.

Sources:

  1. https://www.vancourier.com/real-estate/real-estate-affordability-worsened-by-taxes-and-limited-options-say-b-c-residents-1.23841497
  2. https://biv.com/article/2019/05/nearly-90b-equity-wiped-lower-mainland-home-values-past-year-infographic
  3. https://biv.com/article/2019/05/marshmallow-soft-bc-home-sales-fall-11-prices-keep-sliding-forecast
  4. https://www.cbc.ca/news/canada/british-columbia/trans-mountain-bc-appeal-court-1.5148368
  5. https://www.rebgv.org/market-watch/monthly-market-report/july-2019.html
  6. https://www.vreb.org/current-statistics
  7. http://fvreb.bc.ca/statistics/Package201905.pdf
  8. https://www.omreb.com/files/05%20-%20CO%20Statics%20-%20May%20-%202019.pdf
  9. http://www.bcnreb.bc.ca/creastats

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