The housing market slowdown in Vancouver has spread to the Okanagan, though it’s not cause to panic, says an industry expert.
Elton Ash, the regional executive vice president of RE/MAX of Western Canada, said local market watchers should expect to see condominium and single family home prices fall in the year ahead, as more balanced buying and selling conditions take shape.
“Condos won’t be as negatively affected as single detached homes will be. We are looking at a two per cent (price drop) for condos and for a single detached home, we are seeing a three per cent drop,” said Ash, adding the number of sales year-over-year has dropped by 33 per cent in Kelowna.
At the same time, the average residential sale prices increased by six per cent year-over-year from $674,930 in 2017 to $718,915 in 2018, with prices expected to decrease by three per cent in 2019.
The changes in the market stem from several factors.
Rising interest rates, government policy changes and the mortgage stress test all contributed to the decline, which is expected to continue into 2019.
READ ALSO: CONSTRUCTION IN GOOD SHAPE
“The drop in sales in key markets across British Columbia can be partially attributed to Canadians’ increasing difficulty in getting an affordable mortgage in the region,” said Ash. “The situation created by the introduction of the mortgage stress test this year, as well as continually increasing interest rates, means more Canadians will be priced out of the market.”
While upcoming price decreases may raise concerns that a crash, the likes of which was last seen in 2008, is on its way, Ash said that’s not the case.
“The last time was a pure oversupply of condominiums that developers built without resale, there was also concern with people with walking out on deposits and that kind of thing,” he said.
“In this instance projects are going are through with presales….there is some oversupply, but it is not as dramatic.”
In fact, Ash said that the changes in the market this time around are actually healthy.
“Really this is not bad news,” said Ash. “This is a good news story. When you are in a multiple offer situation in a strong sellers market it’s stressful for everyone.”
Nationally, conditions are more robust. Modest price increases are expected in 2019, as the RE/MAX 2019 Housing Market Outlook estimates the average sales price to increase by 1.7 per cent. Housing markets across the country have stabilized in 2018, after the unprecedented increases in average sales price that many markets experienced in 2017.
However, there continue to be some outliers in 2018 average sales price gains, particularly in areas outside of the main city centres, such as Chilliwack (+13 per cent), Windsor (+13 per cent), London (+17 per cent) and Charlottetown (+11 per cent).
A recent survey revealed almost one-third (31 per cent) of Canadians said higher interest rates have not affected their ability to get an affordable mortgage thus far. However, this is expected to change in 2019.
A separate survey of RE/MAX brokers and agents found 83 per cent predict rising interest rates will make it more difficult for Canadians to purchase a home next year.