Canadian home sales are expected to drop this year and BC’s new property taxes could be partly to blame.
In February, the BC government unveiled its 2018 budget which includes a new housing plan to address eroding affordability in the province — particularly in Greater Vancouver.
The plan features a new speculation tax, along with a five per cent increase to the already existing foreign buyers tax.
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According to RBC Senior Economist Robert Hogue, BC’s new housing policies could play a minor role in dampening national home sales this year.
“We do expect that home resale activity at a national level will slow down for a second consecutive year and this is going to be partly because of policy measures that are designed to slow down the market,” Hogue tells BuzzBuzzNews.
“BC might move the national needle to a certain extent but probably not that much,” he adds.
RBC predicts that national resales will drop 3.7 per cent to 497,400 units this year.
To Hogue, the main contributors to this decline are stricter mortgage regulations and interest rate hikes.
However, Hogue notes that at the end of 2018, it will be difficult to decipher which factor weighed the most on national resale activity.
“It’s going to be difficult from a national point of view to disentangle the effects of various factors, including those measures in BC, but also measures that affect other regions as well,” says the RBC economist.
The results of a recent Reuters survey echoes Hogue, with market analysts saying that rising borrowing costs and new government policies will slow down turnover in Canada’s housing market this year.
Eleven out of 15 respondents expect turnover to be lower in 2018 compared to 2017 and none of those surveyed said turnover would be higher.
Along with easing sales, respondents believe that home prices will rise 2.5 per cent nationally this year, faster than the 1.9 per cent predicted in a December poll.
The faster than expected rise in prices is attributed to a forecasted drop in housing starts this year in a market that already faces limited supply.