As national home sales slide, falling 17% year over year in February, the attention shifts to British Columbia, Canada’s most expensive housing market. Despite the barrage of Government policies aimed at curbing the residential housing market, including, a 20% foreign buyers tax, a speculation tax, and an increase of property transfer tax, the market has remained surprisingly resilient.
Since prices bottomed in November 2008 after the financial crisis, BC home prices have inflated 97%, peaking out In February 2016 at $779,419. As prices reached dizzying heights many defeated buyers gave up their aspirations for the detached market, and instead, feasted on the condo market.
However, despite the red hot condo market, the total average sales price across BC has failed to eclipse it’s 2016 peak. As of February 2018 the average sales price sat at $748,149 a 9% increase from February 2017 but 4% below 2016 levels.
The resulting decline of the average sales price falls in line with the decline of total dollar volumes, which have sunk 38% from February 2016. It would appear the glory days of irrational exuberance are in the rearview mirror. At least in the residential space.
Avison Youg is reporting the value of British Columbia’s commercial real estate sales last year smashed the record set in 2016 by an astonishing $3.4B. Total investment into BC commercial real estate hit $7.5B in 2017, up from $4.1B in 2016.
The commercial real estate firm stated “the BC market has not registered a noteworthy downturn in pricing in more than a decade – boosted demand from well capitalized buyers with the mindset that such assets will continue to rise in value. Interest-rate increases, rising bond yields and changes in government at the federal and provincial levels along with new taxes did not appear to have much impact on commercial real estate investment in BC in 2017.”
Further adding “after a resurgence of the Canadian dollar in early 2017, the dollar has slid back down in the face of U.S. trade uncertainties, which makes real estate assets more attractive to foreign buyers from a currency perspective. Efforts to curtail the outflow of Chinese capital appear to have had limited impact on purchasers buying in BC in 2017.”
However, land speculation in BC may face significant headwinds following the unsustainable price inflation, with Avison Young concluding “Developers and investors are also beginning to take a pause on acquiring land because the cost, combined with rapidly increasing construction costs and municipal fees, are driving the total price to untested levels. There is some concern in the ability of the market to support the pricing that the costs demand.”