WATCH: Our real estate market has been nothing short of red hot for the last two years, but new reports say now we’re in the middle of a mild housing recession. Home prices are expected to decline, and as Kori Sidaway tells us, it’s already affecting those trying to sell their homes on Vancouver Island.
A newly revamped home overlooking Cordova Bay is up for sale, but surprisingly, has been sitting on the market for three months.
“This house has been on the market since mid-September and we have had some interest, but there has been this stabilization of the market,” said Ross Mitchell, owner of Provincial Property Services.
Mitchell isn’t the only one feeling the side effects of a cooling housing market. New reports say that real estate prices are softening all across Canada. And here in B.C., some economists say we’re in the midst of a mild recession.
“Some of the federal changes in regulation including the stress test, the combination of provincial measures such as the speculation tax and foreign buyers tax hikes, and higher interest rates are all coming together to create this slide in the housing market,” said Bryan Yu an economist with Central 1 Credit union who studied the province’s housing market.
To put it in perspective, In November of 2017 a single family home in Greater Victoria sold for an average of $902,985. This November, that average price dipped to $851,481- a drop of more than $51,000.
The housing forecast says the market will be mostly subdued for the next three years for sales and home values, but low supply and high demand has kept prices firm or rising on Vancouver Island despite weaker transaction activity.
“With 2016 and 2017 being the biggest year for Victoria real estate, when numbers comes off that quite a bit it can seem like a lot but when we compare to the 10 year historical average we’re getting back to that average and more normal, markets,” said Victoria Real Estate Board President Kyle Kerr.
The report says residential sales were down 11.9 per cent at the end of 2017 in Greater Victoria, and forecast to drop another 16.9 per cent in 2018.
And agents say the cooling off of the hot housing market be a good thing for buyers looking to get in.
“I think you can expect houses will sit on the market a little bit longer, you’ll have a bit more choice, and for sellers the big price growths of the last couple years its over,” said Kerr.
Economists, agents and developers all agree – the bubble hasn’t burst, and things aren’t going to collapse.
“Really the conditions around construction haven’t drastically changed. So, houses will have to stay at this market unless we see a reduction in material cost and a reduction in trade cost and it doesn’t look like that’s going to be happening anytime soon,” said Mitchell.
So while the long overheated housing market cools, it’s business as usual.
“I think that at the end of the day a stable market is a happy market,” said Mitchell.
Central 1 says sales will pick up over three per cent in each of the next two years and the forecast median price increase will be 6.1 per cent this year.
Although the report forecasts a 0.3 per cent decline in Greater Victoria’s median resale price in 2019, it also predicts 1.2 per cent growth over the following two years, reaching $595,000 by the end of 2021.
Price growth is expected to continue for other areas of the Island but at a slower pace.
In Nanaimo, the report says by the end of 2018 the median house price will have shot up 31.4 per cent between 2016 and 2018 to $425,000.
Central 1 is calling for 1.2 per cent median price increases in each of the next two years, followed by a 1.6 per cent climb in 2021 to $442,000.
As for sales, Nanaimo is forecast to see a nearly six per cent hike for activity in 2019 before leveling off the following two years.
Central 1 says by the end of 2018, other Vancouver Island prices will have climbed 27.4 per cent over the last three years but will see gradual increases of no more than 2.2 per cent in the next three years.
Island housing markets continue to be supported by local factors including employment and population growth and demographic changes, according to Central 1.
The report says the homes sales swoon in B.C. continues because of federal mortgage rules, higher mortgage rates and provincial policy measures.
Central 1 says larger downpayment constraints for potential home buyers, particularly those trying to get into the market for the first time, will put more stress on purchasing power in B.C.’s higher priced urban markets.
The report says red-hot markets have cooled off because of the sales slump, especially for the lower mainland, which Central 1 says is shifting to a buyers’ market
Central 1 says the market has been significantly weaker after rapid value jumps in 2016 and the implementation of the foreign buyers’ tax, among other policy measures.
A Canadian Real Estate Association (CREA) November sales report says for the first time in five years, Greater Vancouver saw a year-over-year price drop of 1.4 per cent, but sale prices went the other way on the Island.
CREA says year-over-year increases home sale values were 7.4 per cent in Victoria in November and 12.6 per cent elsewhere on the Island.