Home sales in British Columbia, Canada’s westernmost province, collapsed in 2018 is mostly correlated to the mortgage stress test that started in January 2018, which decreased buyers’ purchasing power.
The B.C. Real Estate Association (BCREA) reported Tuesday that a total of 78,345 homes were sold on B.C.’s Multiple Listing Service (MLS) in 2018, a massive drop of 24.5% from the 103,758 units sold in 2017.
“B.C. home sales fell below the 10-year average of 84,800 units in 2018,” said Cameron Muir, BCREA’s chief economist. “The sharp decline in affordability caused by the B20 mortgage stress test is largely to blame for decline in consumer demand last year.”
The slowdown in home sales is a government measure to cool the Greater Vancouver’s bubbly housing market that will take full effect in 2019, setting the stage for further declines.
Numerous provincial policies, combined with the federal stress test have clamped down on the buying power of borrowers, leading to a possible near-term top in the housing market.
Despite this rapid slowdown, the average sale price of all homes in the province was the same price versus the previous year, edging up +.40% to $712,508 – an increase of roughly $3,000.
The slight upward trajectory in prices masks the topping activity that was spotted in early 2018. Sales prices continued rising to record levels until late spring, and since, have been declining gradually, as fewer luxury homes sold.
The province experienced the most significant slowdown in sales activity in Greater Vancouver (-30.4%) followed by the Fraser Valley (-26.3%). The only region within the province to see an annual jump in home sales was the Northern region, which saw a rise of 10.2% over 2017. All areas saw a slight year-over-year increase in the average home sale price, but momentum is undoubtedly waning.
The BCREA also reported on December 2018’s housing stats. A total of 3,497 were sold on the province’s MLS in December, down 39.1% from December 2017.
The average price in the province in December was $695,647, a drop of 5.2% compared with December 2017.
The BCREA added, “Total active residential listings were up 33.3% to 27,615 units in December, the highest December inventory since 2014 when 33,995 active residential listings were recorded.”
Despite the significant sales activity slowdown last year, it seems inventory is now flooding the market with declining demand, a move that could send the industry in turmoil by summer. These are the markings of a real estate top. If you live in the British Columbia region, prepare for an economic storm.