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Vancouver's housing market is headed for a 'bumpy landing,' economist says

© Reuters/Reuters Photographer


  • Following new mortgage regulations and higher rates, Canada's most expensive housing markets have slowed sharply this year.
  • The housing market in Toronto has showed signs of stabilization in recent months.
  • But Vancouver may not be headed for a similarly soft landing, economists say.

As Canada's housing market cools down, economists say some of its once-booming cities look poised for uneven corrections. 


Canada's housing market has cooled since new mortgage regulations aimed at reining in demand and risky lending took effect at the start of the year, with national sales falling 3.7% from a year earlier in October. Toronto appears to have stabilized in wake of the legislation, which requires stress tests on uninsured mortgages, but other cities may not be headed toward a similarly soft landing.


Vancouver's housing market is more overvalued than Toronto's, Capital Economics senior Canada economist Stephen Brown said in a note titled "Vancouver housing heading for bumpy landing." And there are signs excess supply could be coming within the next couple of years, with Vancouver's home listings jumping to four-year highs this fall.


Toronto's regional real estate board said this month that sales rose 6% last month from a year earlier, with the average selling price up about 3.5% in that same period. Meanwhile, sales in Vancouver remained well below historic averages in October.


Because housing prices in Toronto are less stretched relative to income than in Vancouver - where a five-year, fixed-rate mortgage for an average property with a 20% down payment makes up 72% of pre-tax household income - tighter regulations may have influenced the market there to a greater degree. Home prices in Vancouver are more than 12 times the median household income, according to Capital Economics, compared with nine times in Toronto. 



a screenshot of a map© Capital Economicsa close up of a map© Capital Economics


"The upshot of all this is that there are numerous reasons to think that Vancouver house prices are more vulnerable to a correction than those in Toronto," Brown added. "Because of that, there is greater reason to think that the regulation-induced downturn in sales will be sustained and will lead to a drop in house prices."


Canada's central bank, which has raised interest rates five times since last summer, has been closely watching the housing market. On Thursday, Bank of Canada senior deputy governor Carolyn Wilkins said risks are still elevated despite higher borrowing costs and and stricter mortgage rules.


"The vulnerabilities are down but they are still high," she said at an Ottawa conference hosted by the Canada Mortgage and Housing Corporation. 


Provided by: Gina Heeb for MSN Money


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Balanced Conditions Prevail in BC Housing Market

Vancouver, BC – November 14, 2018. The British Columbia Real Estate Association (BCREA) reports that a total of 6,405 residential unit sales were recorded by the Multiple Listing Service® (MLS®) across the province in October, down 26.2 per cent from the same month last year. The average MLS® residential price in BC was $690,161, a decline of 4.1 per cent from October 2017. Total sales dollar volume was $4.2 billion, a 29.3 per cent decline from October 2017.

“The BC housing market continued to grapple with tougher mortgage qualifications in October,” said Cameron Muir, BCREA Chief Economist. “However, more moderate consumer demand has led to a much-needed increase in the supply of homes for sale.”

Total active residential listings were up nearly 30 per cent to 36,195 units in October, compared to the same month last year. While the BC housing market exhibited balanced conditions overall in October, market conditions do vary between regions and by product type.

Year-to-date, BC residential sales dollar volume was down 22.1 per cent to $49.7 billion, compared with the same period in 2017. Residential unit sales decreased 22.8 per cent to 69,664 units, while the average MLS® residential price was up 1 per cent to $713,662.

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BCREA is forecasting a better year ahead for BC sales

Home sales in British Columbia have been subdued during 2018 and are expected to end the year 23% lower than 2017 with 80,000.


The figures from the British Columbia Real Estate Board (BCREA) reflect the tough year the province’s housing markets – especially Vancouver – following policy changes including the mortgage stress test and interest rate hikes. It could have been worse though had the economy not remained supportive.


But there is better news ahead with sales forecast to rise 12% in 2019 to 84,000 units, just above the 10-year average of 80,000.


“The marked erosion of affordability and purchasing power caused by the mortgage stress test and rising interest rates continue to be a drag on the housing demand,” said Cameron Muir, BCREA Chief Economist. “However, continuing strong performance in the economy combined with favourable demographics is expected to push home sales above their 10- year average in 2019.”


Most markets in BC have moved to balanced conditions with fewer sales and rising inventory. That has meant an easing of price appreciation which is expected to more closely track consumer price inflation in 2019.


Record construction in BC is also bringing new supply to the market which BCREA believes should further support price stability.


Provided by:  Steve Randall for the Real Estate Professional

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The British Columbia Real Estate Association (BCREA) released its 2018 Fourth Quarter Housing Forecast today.

Multiple Listing Service® (MLS®) residential sales in the province are forecast to decline 23 per cent to 80,000 units this year, after recording 103,768 residential sales in 2017. MLS® residential sales are forecast to increase 12 per cent to 89,500 units in 2019. The 10-year average for MLS® residential sales in the province is 84,800 units.

“The marked erosion of affordability and purchasing power caused by the mortgage stress test and rising interest rates continue to be a drag on the housing demand,” said Cameron Muir, BCREA Chief Economist. “However, continuing strong performance in the economy combined with favourable demographics is expected to push home sales above their 10year average in 2019.”

Despite the mortgage policy drag on the sector, strong performance of the BC economy continues to be highly supportive of housing demand. Five consecutive years of above trend growth in the province has led to a high level of employment and an unemployment rate that appears to be at a cyclical low.

The combination of fewer home sales and a larger inventory of homes for sale has helped trend most markets to balanced conditions. As a result, home price growth has slowed considerably, and is expected to more closely reflect overall consumer price inflation through 2019. In addition, a record number of homes are under construction in BC, which will provide for much needed expansion of the housing stock and greater price stability.


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Provided by: BCREA

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Canada’s housing markets should see a moderation in both housing starts and sales while house prices are expected to reach levels that are more in line with economic fundamentals such as income, job and population growth. This forecast for 2019 and 2020 is drawn from the 2018 Housing Market Outlook released today by Canada Mortgage and Housing Corporation (CMHC).


Nationally, CMHC’s outlook for 2019 projects total housing starts to edge down and range between 193,700 to 204,500 with the downward trend expected for both single and multi-unit starts. MLS sales are expected to be between 478,400 and 497,400 units annually while MLS prices should lie between $501,400 and $521,600.

Regional Highlights:

British Columbia

Housing starts activity and MLS Sales in British Columbia should moderate as economic and population growth slows while MLS Average Prices are expected to see a flatter growth profile through 2020.

Prairies

Buyers’ market conditions in both Alberta and Saskatchewan should gradually shift to a balanced market with gradual improvement in economic and demographic fundamentals. Balanced market conditions in Manitoba are expected to continue.

Ontario

Ontario’s housing market saw dampened activity in 2018. Existing home sales and starts will post a partial recovery in 2019. Buyers are expected to re-enter the market on the strength of stronger than expected job growth and in-migration before the downward trend in starts and sales resumes in 2020.

Québec

Housing starts and sales of existing homes will both be sustained, however, slower economic growth and rising borrowing costs will moderate activity through 2020. Starts will continue to be dominated by the apartment market segment, while demand for resale single-detached homes will remain relatively strong.

Atlantic

The Atlantic region will see sustained activity, notably in Nova Scotia, where existing home sales and average prices should trend higher while rental demand will drive growth in apartment construction.

Selected CMA-level Highlights:

Metro Vancouver

Over the next two years, Metro Vancouver’s resale market will see lower sales, higher inventories of homes for sale and lower home prices compared with recent market highs. Through 2018, demand and home prices softened across all market segments and local geographies.

Calgary

Various factors will push and pull the demand for housing in Calgary in 2019 and 2020. Calgary’s economy will experience stronger growth in population and employment. This will help support demand and lift sales in 2019 and 2020. However, the average MLS price will continue to face downward pressure but is expected to stabilise in 2019 and modestly rise in 2020.

Toronto

With balanced conditions prevailing in the GTA, we expect moderate sales growth and home prices growing in line with inflation over the forecast horizon. The rising costs of home ownership will result in strong rental demand while new supply will add some upward pressure on vacancy rates. Toronto buyers should see more housing choices as builders concentrate their efforts on new high-rise projects.

Montreal

In 2018 and 2019, rental housing demand will increase slightly faster than supply in Montreal, which will put some downward pressure on the vacancy rate. Demand will be supported by rising net migration over the forecast horizon.


Provided by: CMHC

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Home sale activity across Metro Vancouver* remained below long-term historical averages in October.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 1,966 in October 2018, a 34.9 per cent decrease from the 3,022 sales recorded in October 2017, and a 23.3 per cent increase compared to September 2018 when 1,595 homes sold.

Last month’s sales were 26.8 per cent below the 10-year October sales average.

“The supply of homes for sale today is beginning to return to levels that we haven’t seen in our market in about four years,” Phil Moore, REBGV president said. “For home buyers, this means you have more selection to choose from. For sellers, it means your home may face more competition, from other listings, in the marketplace.”

There were 4,873 detached, attached and apartment homes newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in October 2018. This represents a 7.4 per cent increase compared to the 4,539 homes listed in October 2017 and a 7.7 per cent decrease compared to September 2018 when 5,279 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 12,984, a 42.1 per cent increase compared to October 2017 (9,137) and a 0.8 per cent decrease compared to September 2018 (13,084).

For all property types, the sales-to-active listings ratio for October 2018 is 15.1 per cent. By property type, the ratio is 10.3 per cent for detached homes, 17.3 per cent for townhomes, and 20.6 per cent for condominiums.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below the 12 per cent mark for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

“Home prices have edged down between three and five per cent, depending on housing type, in our region since June,” said Moore. “This is providing a little relief for those looking to buy compared to the all-time highs we’ve experienced over the last year.”

The MLS® Home Price Index composite benchmark price for all residential homes in Metro Vancouver is currently $1,062,100. This represents a one per cent increase over October 2017 and a 3.3 per cent decrease over the last three months.

Sales of detached homes in October 2018 reached 637, a 32.2 per cent decrease from the 940 detached sales recorded in October 2017. The benchmark price for detached properties is $1,524,000. This represents a 5.1 per cent decrease from October 2017 and a 3.9 per cent decrease over the last three months.

Sales of apartments reached 985 in October 2018, a 35.7 per cent decrease compared to the 1,532 sales in October 2017. The benchmark price of an apartment property is $683,500. This represents a 5.8 per cent increase from October 2017 and a 3.1 per cent decrease over the last three months.

Attached homes sales in October 2018 totalled 344, a 37.5 per cent decrease compared to the 550 sales in October 2017. The benchmark price of an attached home is $829,200. This represents a 4.4 per cent increase from October 2017 and a 2.8 per cent decrease over the last three months.


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Provided by: REBGV

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