British Columbia

After a taxing year for real estate, housing market expected to remain cool in 2019

In early December the Real Estate Board of Greater Vancouver reported a nearly 43 per cent decrease in sales of condos, townhouse and detached homes in November, compared to the same month a year before.

4 new taxes, more inventory, higher interest rates all having an effect, experts say

Housing experts expect prices in Vancouver to further soften in 2019. (Gian-Paolo Mendoza/CBC)

Market watchers say 2019 could be the year to buy a house or condo for less in B.C., thanks to increased supply and regulatory measures that have combined to suppress home sales.

In early December the Real Estate Board of Greater Vancouver reported a nearly 43 per cent decrease in sales of condos, townhouse and detached homes in November, compared to the same month a year before.

It says the benchmark price — the average price for a typical home — is $1.5 million for a detached house, $818,500 for a townhouse and $667,800 for a condo.

Those prices are between four and seven per cent lower than they were six months ago, according to the board.

"My guess is 2019 will not be a banner year for sales in Greater Vancouver and I expect further price declines," said Tom Davidoff, an associate professor at UBC's Sauder School of Business.

"But I also have a lot of uncertainty around that because a lot can happen in the market."

'Homebuyers have been taking a wait-and-see approach for most of 2018,' said Phil Moore, president of the Real Estate Board of Greater Vancouver. 'This has allowed the number of homes available for sale in the region to return to more typical historical levels.' (Jonathan Hayward/Canadian Press)

Some economists point to more stringent mortgage qualifying requirements and higher interest rates as some of the driving forces behind the downward turn.  

Davidoff adds more inventory to that list, due to slumping sales and also because more construction projects are being completed. 

New taxes

Four regulatory taxes, meant to make housing more affordable, are also having an impact, he said.

First of all the province increased its foreign buyers tax, which was introduced in 2016, from 15 per cent to 20 per cent. It also expanded the tax to include Nanaimo, Victoria, the Fraser Valley and the Central Okanagan.

After its first year in place, an empty homes tax has created $38 million in total revenue for the City of Vancouver. The program is meant to return empty or under-utilized properties to the rental market while revenue generated by the tax is required to be used for affordable housing projects.

Economists argue that a continuing drop in housing prices could stall new construction projects. (The Associated Press)

In October, the provincial government introduced legislation for a speculation tax on vacant or under-utilized properties in several regions. The tax is for homeowners who don't live at the property or rent it out and is set at 0.5 per cent for 2018.

Finally, in 2019 the province will implement its controversial school tax, which is an additional 0.2 per cent on the value a home worth $3 million or more, or 0.4 per cent for a home more than $4 million.

'Pressure to add density'

Davidoff says the taxes, particularly those targeting properties worth the most, could make single-family homes the most difficult sell in 2019 and force a change in housing policy in cities like Vancouver.

"There may be additional pressure to add density in single-family neighbourhoods," he said. "That would certainly be a helpful thing because single-family is not an affordable product here and it won't be even if the market continues to struggle."

A slide presented to Vancouver city councillors on June 19 demonstrating the type of housing that soon could become legal throughout Vancouver's single-family neighbourhoods. (City of Vancouver)

Homeowners will begin seeing valuation assessments in January, but B.C. Assessment has already said that the softening market has lowered some valuations in Metro Vancouver.

That's not the case in other markets, however. Homeowners in the rest of the province can expect increases of five to 15 per cent for assessed values of single-family homes.