(Canadian Press photo)

Greater Vancouver house prices expected to rise five per cent in 2018

Strict incoming mortgage rules will slow growth for first half of 2018

Despite tough new mortgage rules being introduced in January, house prices in the Greater Vancouver area are expected to go up by 5.2 per cent in 2018.

According to a Royal Le Page report released Wednesday, the impact of the new mortgage “stress test” is likely to only lead towards price stagnation for the first half of the new year.

The new rules mean that all borrowers must qualify for a mortgage based on either the five-year benchmark rate or their lender’s actual rate plus two per cent, whichever is higher. The change will apply to all mortgages, new or renewed, even if the downpayment exceeds 20 per cent.

“With a large number of existing homeowners potentially failing the test when refinancing next year, a temporary reduction in consumer confidence may further stagnate price growth as potential buyers and sellers take a ‘wait and see’ approach,” the report reads.

The report predicted that growth in the Lower Mainland will be slightly faster than in the rest of Canada; country wide, home prices are expected to rise by 4.9 per cent to $661,919, versus this region’s 5.2 per cent jump to $1,353,924.

READ: Strong economy fuels housing sales in B.C.: report

The report notes that Greater Vancouver’s slightly faster growth and higher house prices could be attributed to B.C.’s economy, which is expected to be a top performer in 2018.

The new mortgage rules are expected to further strain the region’s housing market. Not only will it be harder for buyers to qualify but the report finds that potential sellers may hesitate to list their homes at all, in fear that they won’t be able to qualify to buy a property of their own.

“We are watching how the new ‘stress test’ will impact the Greater Vancouver market,” said Randy Ryalls, Royal LePage Sterling Realty general manager.

“Low inventory will continue to put upward pressure on prices. However, with the introduction of the stress test, as well as other factors such as potential interest rate hikes, price growth will likely be limited to mid-single digits.”

Additional housing market pressure is expected to come from both a surge in those moving from other provinces to B.C. and peak millennials still looking to buy property despite increasingly unaffordable prices. Almost nine-in-10 millennials see real estate as a good financial investment.”

“[Our] research into peak millennials shows that younger Canadians desire to own their own homes with the same conviction as their parents before them,” said Royal LePage CEO Phil Soper.

“The tight rental market is reflective of their dreams sitting on hold while they save for a down payment. Of course there will be those who are priced out of a market altogether. They will continue renting and this will drive demand for investor properties.”


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