Without the mortgage stress test, home sales in British Columbia would have been 10% higher, claims the province’s real estate association.
In a new report analyzing B-20’s impact on the provincial housing market in 2018, the British Columbia Real Estate Association asserts the province lost out on 7,500 sales worth about $500 million in economic activity. While B.C. wasn’t the only province to experience a steep decline in sales—the entire country did—a slew of policies implemented by the provincial government, which were designed to curtail rapid price escalation, could have also caused the market to seize.
“When we look at markets across Canada, it appears that the outsized decline in B.C. may have more to do with relatively stretched affordability in B.C. compared to the rest of the country,” said the report. “Expensive markets in other areas, most notably those near Toronto, also experienced significant declines in 2018.”
Using a baseline of 90,500 B.C. home sales in 2018, BCREA estimates that there were 13,000 fewer sales in 2018 than during the previous year, but concedes “market forces such as rising interest rates, deteriorating affordability and a slowing economy” were also factors.
“Given that home sales in 2018 were 78,346, this means that factors outside of those explicitly controlled for in the model need to explain about 12,000 additional lost sales,” continued the report.
“We estimate the lost sales due to B-20 in 2018 to be a range of 5,300 to 11,500 units, with an average of 7,500 units. On average, we estimate that B-20 accounted for about 30% of the total downturn in B.C. home sales observed in 2018 and cost the province approximately $500 million in spin-off activity related to MLS home sales.”