Recent changes such as the foreign buyer tax and strict new mortgage qualification rules have yet to cause a drop in home prices – but with sales likely to continue their slide, that drop will come, according to a National Bank forecast issued October 21.
The bank said in its latest economic report that “the reason the sharp drop in sales has yet to translate into a price decline is that the resale market remained tight.”
The report went on to say, “We think Vancouver home prices will soon start correcting. We expect a decline over 12 months of 10 per cent overall and 20 per cent for detached homes.”
The bank pointed out that the downturn in home sales began considerably the introduction of the new overseas buyer tax.
“Some observers expected the July 25 announcement of a new 15 per cent tax on the value of homes acquired by a non-resident... to have an immediate and dramatic effect on existing-home sales in the Vancouver market,” wrote the authors. “A downtrend has indeed begun. But it began in March, well before the new tax was announced.”
The report also observed that despite the decline in average sales prices reported by the Real Estate Board of Greater Vancouver in August and September, the Teranet-National Bank Home Price Index has remained flat.
It said, “This would seem to contradict the REBGV’s report of a 17 per cent drop from July to August in the average selling price of detached homes. But it doesn’t – the REBGV noted that the decline it reported was due not to a decline in property values but to a decline of the share of the most expensive homes in the total number of units sold.”
However, the bank believes that a resurgence in the number of listings, combined with a continued decline in home sales, will bring Greater Vancouver back into a buyers’ market, which will lead to the value of homes in dropping over the next 12 months before stabilizing.