Vancouver Detached Home Prices Drop By $170,000, And The Industry Is Blaming Government
April 12, 2019
Vancouver’s closely-watched housing market clocked another weak month in March, with sales falling to their lowest level since 1986.
Only 1,727 homes changed hands in Greater Vancouver in March, down 31.4 per cent from the same month a year earlier, the Real Estate Board of Greater Vancouver said Tuesday.
Prices for all housing types are falling. The benchmark price of a detached home clocked in at $1.437 million, down 10.5 per cent, or about $170,000, in a year.
Condo prices are down 5.9 per cent in a year, to $656,900.
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The industry’s growing frustration with government policies on housing was evident in the REBGV’s latest report.
“Housing demand today isn’t aligning with our growing economy and low unemployment rates. The market trends we’re seeing are largely policy induced,” REBGV president Ashley Smith said.
“For three years, governments at all levels have imposed new taxes and borrowing requirements on to the housing market.”
British Columbia’s provincial government introduced a foreign buyers’ tax in mid-2016, in response to rapidly growing house prices. It was bumped up to 20 per cent, from 15 per cent, last year.
The city has also seen the introduction of a vacant home tax.
The region’s market has also been hit by the federal mortgage stress test, which reduced the maximum amount a borrower can take out on a mortgage by about 20 per cent, as well as by rising mortgage rates over the past year-and-a-half.
“What policymakers are failing to recognize is that demand-side measures don’t eliminate demand, they sideline potential home buyers in the short term,” Smith said.
“That demand is ultimately satisfied down the line because shelter needs don’t go away. Using public policy to delay local demand in the housing market just feeds disruptive cycles that have been so well-documented in our region.”
However, many experts say easing the recent rules on the housing market, such as eliminating the foreign buyers tax or the mortgage stress test, would just cause prices to start rising again, and household debt levels to climb.
New policy measures
In its recently released budget, the federal government announced a number of measures to help homebuyers, including a First-Time Homebuyer Incentive. Under this plan, the government-run Canada Mortgage and Housing Corp. (CMHC) contributes up to 10 per cent of the price of a new house, or five per cent of the price of an existing home, to qualifying first-time buyers.
CMHC would recoup its money when the home is sold. The measure is meant to reduce monthly mortgage payments.
Some market experts have said this plan will have limited impact on the priciest markets. It caps the maximum mortgage amount at $480,000, meaning it will be of limited use in Toronto and Vancouver, where average prices are well above that.