B.C. housing market amid a ‘mild recession’, Central 1 report

Although home sales have been on a sharp decline the last two years, it still will not have a dramatic impact on the cost of buying a home on Vancouver Island.
That’s according to a report by Central 1 Credit Union that says the province’s housing market is dealing with a “mild recession” because of declining home sales, housing starts and sale prices.
The housing forecast says the market will be mostly subdued for the next three years for sales and home values, but low supply and high demand has kept prices firm or rising on Vancouver Island despite weaker transaction activity.
The report says residential sales were down 11.9 per cent at the end of 2017 in Greater Victoria, and forecast to drop another 16.9 per cent in 2018.
But Central 1 says sales will pick up over three per cent in each of the next two years and the forecast median price increase will be 6.1 per cent this year.
Although the report forecasts a 0.3 per cent decline in Greater Victoria’s median resale price in 2019, it also predicts 1.2 per cent growth over the following two years, reaching $595,000 by the end of 2021.
Price growth is expected to continue for other areas of the Island but at a slower pace.
In Nanaimo, the report says by the end of 2018 the median house price will have shot up 31.4 per cent between 2016 and 2018 to $425,000.
Central 1 is calling for 1.2 per cent median price increases in each of the next two years, followed by a 1.6 per cent climb in 2021 to $442,000.
As for sales, Nanaimo is forecast to see a nearly six per cent hike for activity in 2019 before levelling off the following two years.
Central 1 says by the end of 2018, other Vancouver Island prices will have climbed 27.4 per cent over the last three years but will see gradual increases of no more than 2.2 per cent in the next three years.
Island housing markets continue to be supported by local factors including employment and population growth and demographic changes, according to Central 1.
The report says the homes sales swoon in B.C. continues because of federal mortgage rules, higher mortgage rates and provincial policy measures.
Central 1 says larger downpayment constraints for potential home buyers, particularly those trying to get into the market for the first time, will put more stress on purchasing power in B.C.’s higher priced urban markets.
The report says red-hot markets have cooled off because of the sales slump, especially for the lower mainland, which Central 1 says is shifting to a buyers’ market
Central 1 says the market has been significantly weaker after rapid value jumps in 2016 and the implementation of the foreign buyers’ tax, among other policy measures.
A Canadian Real Estate Association (CREA) November sales report says for the first time in five years, Greater Vancouver saw a year-over-year price drop of 1.4 per cent, but sale prices went the other way on the Island.
CREA says year-over-year increases home sale values were 7.4 per cent in Victoria in November and 12.6 per cent elsewhere on the Island.