A quick follow-up to last month's issue when I chose to focus on the primary reason for the current buyer's market, which generally is attributed to the B-20 mortgage stress test that the federal government’s banking regulator (OSFI) imposed.
In the interest of time and realizing most of my audience are busy with limited time to read a lengthy explanation on all the reasons, I chose to focus on the "primary" reason - which is by no means the only reason. Obviously the Feds had their reasons for bringing in the stress test which was to try insulate Canadians from an anticipated downturn, however, they underestimated the affect it would have on the market. The fact is the market was actually slowing down naturally because of affordability (at least where the Greater Vancouver market is concerned). There is only so much that people can afford before incomes need to play catch-up. In my opinion there was no need for an intervention. When demand is artificially reduced, it creates volatility which is what we are experiencing right now. I expect that had there been no intervention, we would have seen a slight pull back on prices and a relatively flat market for a few years before built up demand starts moving prices again.
Are foreign buyers to blame for current slower sales? No. The 6 month slide back in 2016 that I mentioned was a direct result of the foreign buyer tax that was brought in and you can see how short lived the affect was. The market recovered nicely. Another great example of artificially trying to curb demand.
Bottom line, demand and immigration are on the rise. The past 10 years has seen BC's population grow by about 500,000 people. The forecast for the next 10 years is an increase of about 600,000 people so there will be significantly higher demand for housing in the future. Given our land-locked location and a relatively limited supply, prices have only one way to go over the long term. With this in mind, the only solution is to increase the supply with less red tape at the Municipal level.
Obviously there were other reasons for the downturn like rising interest rates and the implementation of the Speculation tax, however their affect was relatively minor compared to the stress test.
As we enter our busiest time of the year there are certainly many more buyers out looking. If you've been thinking about trading up to a bigger home, now is an excellent time to do so. You'll sell your home for a little less however you'll pay less for the one you are buying, which should result in a net gain for you at the end of the day.
As always I welcome your comments and feedback. Please don’t hesitate to call if you have any real estate questions. I am here to help!