´╗┐Regulatory overkill cited as housing outlook goes negative

Dated: February 1 2019

Views: 53

Regulatory overkill cited as housing outlook goes negative

‘Combined effect of tighter mortgage guidelines and higher interest rates has been larger than previously estimated,’ says Bank of Canada

Photo: Dan Toulgoet

Economic growth in Canada from residential real estate investments will go negative in 2019, according to the Bank of Canada (BOC), which has conceded that stiff new mortgage regulations, local housing restrictions and rising interest rates have had a larger and more negative impact than expected.

Consumer spending and housing investment “have been weaker than expected” as housing markets adjust to “to municipal and provincial measures, changes to mortgage guidelines and higher interest rates,” according to a BOC statement.

“Staff analysis suggest that the combined effect of tighter mortgage guidelines and higher interest rates has been larger than previouslyestimated,” the BOC noted in its January statement.

The BOC left the overnight benchmark policy rate at 1.75% in its January 9 setting.

In 2018 Metro Vancouver housing sales fell 32% from a year earlier, to the lowest level since 2000 and 25% below the 10-year average. Prices for Vancouver-area detached homes in some regions dropped at least 10% compared with a year earlier, with even more dramatic declines in higher-end neighbourhoods.

The benchmark price for a West Vancouver detached house as of December was down 13.5% from a year earlier and dropped 11.8% in Vancouver’s west side, the Real Estate Board of Greater Vancouver reported.

“The B.C. government in its 2018 budget increased the foreign-buyer tax to 20% and added a speculation and vacant home tax, which – in addition to rising interest rates – dampened sales, especially for more expensive single-family homes,” noted Sherry Cooper, chief economist with Dominion Lending Centres.

The City of Vancouver is also taxing empty homes for the first time in 2019.

The varied disincentives to the demand side are also affecting the supply of new housing in Metro Vancouver, with housing starts falling 11% in 2018 from a year earlier, according to Canada Mortgage and Housing Corp. (CMHC).

Surrey led the decline in the region with a 27% plunge in starts, noted CMHC market analyst Eric Bond.

The contribution to average annual real economic growth from housing investment in Canada has now been revised down to minus 0.1% in 2019 from the plus 0.1% that the BOC forecast last October.

Blog author image

Steven Axford

Steve is a award winning Realtor in Victoria BC, with his listings selling faster and for top dollar! Growing up in Victoria, BC and has always been active in his community. Steve is a Victoria Cougar....

Latest Blog Posts

BC Home Sales Continue to Slow in July

The British Columbia Real Estate Association (BCREA) reports that a total of 5,572 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in July 2022, a decrease

Read More

Asking price matters

There’s no doubt about the fact that the housing market is slowing from the frenzy we saw over the past two years. But what does that mean for you if you’re thinking of selling

Read More

Adapting Your Finances

The latest news has been focused on rising interest rates, surging inflation, and economic uncertainty with suggestions that the Canadian economy could be tripped into recession.With all this

Read More

New Home Warranties in Strata Corporations

The BC Home Owner Protection Act requires that all newly built homes (including strata properties) or buildings that have been substantially reconstructed be covered by third-party

Read More