Mortgage rules exacerbating slump in B.C. housing sales

The value of home sales in B.C. declined more than 25 per cent last month compared to a year ago, according to a report from the B.C. Real Estate Association. That drop is steeper than in any other province, but reflects a broader housing slowdown stemming in part from stricter mortgage rules across the country.

Sales of residential units in the province last month decreased $2.6 billion — 25.4 per cent — compared to August 2011. The number of home sales in B.C. declined to 5,337 last month, a year-over-year drop of 18 per cent.

Home sale activity nationwide, however, stood only nine per cent below August 2011 levels, according to statistics released Monday by the Canadian Real Estate Association.

“Consumer demand continued to trend lower in August,” said Cameron Muir, chief economist at the BCREA. He said tighter mortgage credit conditions introduced in July are taking a toll on an already tentative market.

“The real key thing for the ownership markets was the reduction in the maximum amortization from 30 years to 25 years,” he said.

That reduction is equivalent to having a full percentage-point increase in the mortgage rate, he added.

“Likely some first-time buyers have been squeezed out of the marketplace as their purchasing power has been eroded.”

Sales of individual houses declined the most, down 39 per cent last month compared to August 2011, Muir said. The number of apartment purchases decreased 25 per cent while sales activity for “attached homes” — usually townhouse units — dropped 22 per cent.

Muir said the drop in the number of sales, dollar volume and average home price are not as jarring as they might appear: “They were skewed high last year. … That was really the result of a larger number of luxury homes being sold.”

The average price paid for a home in B.C. this August was $491,145, nine per cent lower than a year earlier. Nationally, the average price for homes sold in August 2012 was $350,192, up by three-tenths of one per cent from the same month last year.

“While we always caution that housing market trends at the national level can and do run counter to trends in many local markets, the decline in activity in August was definitely the result of much of the country moving in the same direction,” said CREA President Wayne Moen.

“That said, many smaller and more affordable markets bucked the national trend. As always, all real estate is local.”

Vancouver was not among the trend buckers. Home sales dropped 31 per cent last month compared with August 2011. Year-to-date housing sales for the city up to the end of August dropped 21.3 per cent.

Out of nine cities listed in the CREA report, Vancouver was the only one that posted declines in average home price, both year-to-year and year-to-date.

According to the Multiple Listing Service’s housing price index, Calgary and Toronto showed the largest year-over-year increases with 6.5 per cent and 6.3 per cent, respectively.

Forecasts predict a slow rest of the year, with signs of more robust sales activity on the horizon.

“Provincially, overall unit sales are expected to be down 4.4 per cent this year before rising 7.5 per cent in 2013,” said Muir.

Source: The Vancouver Sun