Housing demand across the province will face increasing headwinds in 2018, according to British Columbia Real Estate Association’s chief economist, Cameron Muir.
In its fourth quarter report report issued this morning, the BCREA revealed that Multiple Listing Service (MLS) residential sales in the province are forecast to decline 10.4 per cent to 91,700 units in 2018, after an expected 8.8 per cent decrease this year.
“A rising interest rate environment combined with more stringent mortgage stress tests will reduce household purchasing power and erode housing affordability, Muir said in the report.
He continued that the 5-year qualifying rate is forecast to rise 20 basis points to 5.15 per cent by Q4 2018, and the new qualification rules for conventional mortgages will erode purchasing power by up to 20 per cent.
“Given the rapid rise in home prices over the past few years, the effect of these factors will likely be magnified.”
According to the report, the supply of homes for sale is now trending at or near decade lows in most BC regions. The imbalance between supply and demand has been largely responsible for rapidly rising home prices. The combination of weakening consumer demand and a surge in new home completions next year is expected to induce more balanced market conditions, producing less upward pressure on home prices. The average MLS residential price in the province is forecast to increase 3.1 per cent to $712,300 this year, and a further 4.6 per cent to $745,300 in 2018.
A record 112,209 unit sales were recorded in 2016. The ten-year average for MLS residential sales in BC is 84,700 units.