Many of the housing-focused measures announced in the British Columbia budget this week will have a more muted impact than those implemented in recent years; but there will be a decline in both sales and prices.
That’s because the market is not showing the same levels of excess that it was two years ago according to an analysis from TD Economics’ director and senior economist Michael Dolega.
On the widening of the foreign buyers’ tax, Dolega says that it should cool the markets in those areas not previously included and where prices have soared.
Victoria, Nanaimo, Fraser Valley, and Kelowna price rises should all soften but not to the same degree seen previously in Metro Vancouver especially as the share of homes in the newly-covered areas is modest in comparison.
Taxes to curb speculation, and an increase in property transfer tax for more expensive homes are likely to see a reduction in transactions.
Overall, Dolega says that many of the new policies are worthy initiatives designed to tackle affordability, close loopholes, and tackle tax evasion; and TD Economics expects the Home for BC plan to provide long-term benefits for the province and its residents.
However, there is likely to be short-term slackening of resale activity which could be in the 5-10% range from peak-to-trough, with prices also set for a 5% decline peak-to-trough.
Annual forecasts have been revised for 2018 compared to 2017: BC sales to fall 5.8% (previously forecast was -0.6%); prices to gain by 3.1% (compared to previous forecast of 7.1%).
Toronto and Montreal are likely to benefit from the changes, Dolega’s report concludes.