While there may be more signs of cooling in Metro Vancouver's housing market, experts say significant relief is unlikely for shoppers at the market's lower end.
Sales are well below the 10-year average, according to figures released this morning by the Real Estate Board of Greater Vancouver, and the price of a detached home actually dropped marginally last month in half of the areas tracked.
Some of the biggest price drops have been in the most expensive neighbourhoods, including the West Side of Vancouver and West Vancouver, which have shown four per cent decreases in prices over the past six months.
That's not surprising to Cameron Muir, chief economist for the B.C. Real Estate Association, who says the top of the market is always the most volatile part.
Along with new taxes on foreign buyers, speculators and empty homes, for a detached home costing more than $3 million owners will also pay both the new school tax and the extra property transfer tax if they sell, Muir notes — and all that is cooling sales in the upper price range.
But he says the effect of those taxes will be limited since "only three per cent of homes sell for over $3 million."
Price drop not trickling down
While overall prices are pretty flat across the market, Muir cautions that anyone looking for significant price relief at the lower end is likely to be disappointed.
That's because the unintended consequences of other factors designed to cool the market are actually continuing to push up prices at the lower end.
In fact, while sales of apartments dropped 29 per cent over the last year, the benchmark price has continued to go up over 20 per cent over the same period.
Phil Moore, the president of the Real Estate Board of Greater Vancouver, agrees the new mortgage stress test and rising interest rates are driving up prices at the lower end, where supply remains limited.
He says an average couple making $120,000 annually is limited by the new rules to prices of up to $750,000 — and that's driving up competition for apartments and townhomes.
"First time buyers are so frustrated," Moore says.
Demand forecast to outpace supply
Even with a record 42,000 homes under construction across the region, immigration and changing demographics will mean demand will continue to out strip supply.
"The selection of homes for sale in Metro Vancouver has risen to the highest levels we've seen in the last two years, yet supply is still below our long-term historical averages," says Moore.
Muir agrees that demographics will continue to put pressure on the market's affordable end.
"Underpinning the market we have the millennials, the baby boomers' children which are a huge demographic cohort, now entering their house-forming years. So, they are going to help underpin demand over the next several years, particularly in big cities where young people tend to flock."
If there are any bargains to be had, they will likely be limited to the higher end of the market, says Moore.
However, taking history as a guide, Muir forecasts the negative impact of the new taxes is only likely to last three to four months before prices start to tick up again.