New mortgage qualifications and potentially higher interest rates will temper the housing market in 2018, but won’t do much to reduce housing prices, the B.C. Real Estate Association predicts.
The organization released its 2017 Fourth Quarter Housing Forecast on Tuesday, estimating a 10.4-per-cent decline in residential sales across B.C. next year. That follows an expected 8.8-per-cent drop by the end of 2017.
The numbers also show estimated home sales in 2018 are expected to dip to 91,700 units, according to the association, compared to a record-breaking 112,000 units sold in 2016.
But while the number of home sales will slow, the association’s chief economist Cameron Muir said he does not expect prices to ease up because of mortgage qualification changes set to take effect in January.
“A rising interest rate environment combined with more stringent mortgage stress tests will reduce household purchasing power and erode housing affordability,” Muir said in a news release.
The imbalance between supply and demand has been largely responsible for rapidly rising home prices, Muir said, and the combination of weakening consumer demand and a surge in new home completions may induce a more balanced market condition.
Still, the average price of a home in B.C. is forecast to go up 3.1 per cent to $712,300 this year, and a further 4.6 per cent to $745,300 in 2018.
“Given the rapid rise in home prices over the past few years, the effect of these factors will likely be magnified,” Muir said.