Stronger than average market conditions continue. Last month, 316 single-family homes sold on the Multiple Listing Service® (MLS®) system compared to 288 in January and 345 one year ago. There were 812 single-family homes for sale in February compared to 947 one year ago.
The British Columbia Real Estate Association indicates the housing market in B.C. is still thriving due to the province’s strong economy; however, BCREA forecasts some economic headwinds for 2018. It appears that Guideline B-20 – also known as the mortgage stress test – lay behind December’s uptick in sales as buyers scrambled to purchase before its January 1st implementation. Other risk factors include rising interest rates and new taxes introduced by the provincial government in the latest B.C. budget that broadens the scope of the Foreign Buyer Tax to include the Regional District of Nanaimo (RDN).
The Foreign Buyer Tax should not have a significant impact on our local housing market with homes around our average price point. We estimate that only about 4 per cent of RDN residential real estate transactions in 2017 involved foreign buyers, but this could have an impact on the higher price points and we are watching the inventory levels closely.
More troubling is the new Speculation Tax which targets homeowners who do not pay income tax in B.C., including those who leave their homes empty but still contribute significantly to the economy. “Vancouver Island is a popular destination for retirees, many of whom come from Alberta, and the Speculation Tax could discourage many of those buyers”.
In our local market, we are still seeing many multiple offers, especially for properties in the $400,000 to $500,000 range. Home buying activity has slowed slightly in some higher price points by the Bank of Canada's move in January to hike interest rates to 1.25 per cent. The quarter-point increase was the central bank's third since last summer. In January, Canadian home sales fell by about 14% from the previous month, according to CREA's figures.
In February 2018, the benchmark price of a single-family home in the VIREB area reached $483,400, up 19 per cent from one year ago. (Benchmark pricing tracks the value of a typical home in the reported area.) The benchmark price of an apartment last month rose to $293,900, up 29 per cent board-wide from the previous year, while the benchmark price of a townhouse hit $376,900, a 22 per cent increase from February 2017. Nanaimo’s benchmark price for single family homes rose 18 per cent to $524,400.
Across Canada, the Canadian Real Estate Association reported the number of homes sold nationally in December hit a record high, ahead of a new stress test for uninsured mortgages that requires potential buyers to show they can service their mortgage payments if rates increase.
To recap, the federal banking regulator's tougher rules, which took effect Jan. 1st, now require a stress test to be applied even to borrowers with more than 20 per cent down payment. To qualify for federally regulated mortgages, borrowers must be able to afford interest rates that are two percentage points above the contracted rate or the Bank of Canada's five-year benchmark rate, whichever is higher.
The national average house price for homes sold in February 2018 was just over $494,000, down five per cent from a year earlier. However, excluding Toronto and Vancouver - the country's most active and most expensive markets, the national average price was just under $382,000, up 3.3 per cent from $369,728 a year ago.
For more details or a specific evaluation of your home, please call me or stop by our office for a coffee and I’ll review the market conditions as they pertain to your particular investments.
RE/MAX of Nanaimo
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