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R E A L E S TAT E W E E K LY
2017 Real Estate Market Outlook
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ith a seemingly softening housing market – whether due to various government interventions, or to self-correction – we’re heading into an interesting year for Greater Vancouver real estate. Here’s a summary and analysis of some of the expert outlooks for Vancouver and BC real estate over the next year. Home Sales Despite a record-breaking spring market, the slowing of Greater Vancouver home sales in 2016’s second half meant that 2016 was the third-busiest year for resale transactions, totalling 39,493 units. Across BC, strong growth in other major centres meant that the province’s total could break annual records, with more than 105,000 sales predicted. This is expected to slow in 2017, dropping more than 15 per cent to a total of 96,300 home sales across the whole province in 2017, according to the British Columbia Real Estate Association (BCREA). This is still well above the 10-year average of 85,000 sales a year. The Canada Mortgage and Housing Corporation had a similar forecast for British Columbia. Its Fall 2016 Housing Market Outlook predicted, “[After reaching more than 105,000 sales in 2016] MLS® sales are forecast to range from 88,900 to 99,300 transactions in 2017.” Home Prices Opinion on the direction of home sales may be consistent, but the likely effect
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of all the above on home prices in the region and province has experts divided. In October, the National Bank said, “We think Vancouver home prices will soon start correcting. We expect a decline over 12 months of 10 per cent overall and 20 per cent for detached homes… nine per cent for attached homes and five per cent for condos.” The prediction was echoed in December by Royal LePage, whose president and CEO Phil Soper said: “We’re looking at all these trends. If it’s not doubledigit [decline in Vancouver home prices], it’ll be close to it.” That said, even a 10 per cent drop in average prices, or a 20 per cent fall in detached-home prices, would only bring the market back to around March 2016 price levels. Re/Max predicted Vancouver home prices would slow in their growth, but still continue to rise in 2017, increasing on average another two per cent across all property types over the year. Another leading economist agrees with this trajectory. Helmut Pastrick, chief economist at Central 1 Credit Union, said in September, “After the market has absorbed this new [foreign buyer] tax regime, we will begin to see other market fundamentals come into effect. Prices will then continue to rise, and they will be higher this time next year.”
Greater Vancouver Property Values Up Nearly 30%: BC Assessment
The BCREA’s forecast for the whole of BC falls somewhere in the middle. It said, “While the [provincial] average MLS® price is forecast to decline 6.4 per cent in 2017, most of that change will be due to relatively fewer higher priced homes selling in highly populated regions.” Interest Rates and Financing According to the BCREA, a likely rise in interest rates will put much greater pressure on first-time and low-income buyers. The association echoed widespread predictions that the average five-year mortgage rate will rise in 2017, suggesting it will lift from 3.7 per cent to 3.95 per cent over the year. The five-year qualifying rate – the rate at which “stress-tested” homebuyers must now qualify – is predicted to rise 20 basis points from 4.64 per cent to 4.84 per cent by the end of 2017. However, the BCREA’s mortgage forecast was issued just before BC Premier Christy Clark announced the new program to offer down-payment-matching loans to first-time buyers. This program directly targets the “stress-tested” buyers, and seems to be a deliberate measure to offset the reduction in buying power created by the new federal mortgage rules. Conclusion With predictions of slightly softening prices but increasing interest rates, which may cancel each other out in terms of affordability, and of federal and provincial interventions offsetting the effects of each other, REW.ca believes it is likely that Vancouver and BC real estate will steady and remain stable at a stillelevated level across 2017.
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Infographics: Vancouver and Fraser Valley Real Estate, December 2016