Changes are afoot in real estate BC, Canada,with the introduction of multi-level government policies cooling the market in the region. The average sales price flattened out in June 2019, down 2.2% from the same time last year. However, home sales and prices are expected to recover this coming 2020.
British Columbia housing market cools to “recessionary levels”
In 2016, BC was a red hot market that showed no signs of slowing down. Three years later, prices are back to mid-2015 levels, with BC seeing a 30-year low. Listings staying longer in the market instead of sparking bidding wars and prices have been reduced.
This trend has been observed across Metro Vancouver, with detached properties, attached units, and townhomes selling below their assessed value in Tri-cities.
Chilliwack is an outlier, having seen 4% price increases on average this year.
Elsewhere however, homes in the $4-5 million range have had their prices slashed to around $3 million.
The decrease in sales prices coincides with a sharp drop in motivated buyers.
Although more than 2,600 sales were recorded in May 2019 – the first time experts are seeing more than 2,000 sales this year – sales volume was down by almost 7% from 2018.
However, experts say that the $2-4 million price range is more accessible for the local market, making this a good time for local buyers to make offers.
Market changes come by design
Experts believe that the slowing market is the result of a conscious decision by local and national governments to regulate the rapid growth of the real estate market and make housing more affordable.
The government has enacted the following policies:
- Foreign buyer tax – The local government has imposed additional property transfer tax on foreign entities and taxable trustees on their proportionate share of the residential property transfer of any property within specified areas of BC, including Metro Vancouver and Fraser Valley Regional District.
- Speculation and vacancy tax – The new annual tax is aimed at speculators who own properties in BC but don’t pay taxes in the region. The tax intends to turn empty homes into adequate housing for individuals and generate revenue to support affordable housing.
99% of BC residents are exempt from the tax. Click hereto find out how to exempt yourself.
- Luxury home tax – Luxury home owners must pay an additional 0.2% to 0.4% in school taxes based on the assessed value of the property
“Proportionate share” covers the percentage of interest that the buyer intends to register on title.
Foreign entities must still file an Additional Property Tax Transfer Return for properties that qualify for an exemption.
Click here for more information.
Slump in sales temporary
Sellers will do better in 2020. In June 2019, the BC Real Estate Association predicted that the average sales price will increase 4.2% year over year in 2020, rising to $726,000 as consumer demand starts to recover.
The strong economy and favorable demographics is believed to create pent-up demand for housing in the province.
A recent TD Bank provincial forecast also suggests that the decline in home prices will end in 2020. Recent data has already shown improvements in sales, which have started to pick up, with existing real estate sales and resales stabilizing.
There will be more balance in the housing market through increased demand that will be reflected in home prices.
Meanwhile, buyers, sellers, and real estate professionals can rely on these strategies to navigate changes in the market:
- Technology trends – BC real estate is in for a proptech boom, with predictive analytics, virtual reality, blockchain transactions, and machine learning helping real estate companies take a bold and innovative approach to market uncertainty.
- Property type outlook – Single-family residential properties have had a generally more positive outlook this year, with the aforementioned policies softening the market. Demand for condos has also remained strong in Canada due to affordability and buyers’ lifestyle choices.
- Market outlook – Vancouver, along with Toronto, continues to take the lead in terms of opportunities for real estate investments among all Canadian cities.