New mortgage rules could cool Chilliwack and district real estate for 2018

After the second hottest year on record, lots of speculation on what’s ahead

After the two strongest years in real estate history in the eastern Fraser Valley, what’s up for 2018 is the subject of interest and speculation for those in and out of the business.

Just how much increasing demand will be cooled by new, tougher mortgage qualifications could prove the clincher as to whether 2018 comes in below or above 2017 for sales.

• READ MORE: Top Stories 2017: Skyrocketing real estate market in the news

Over all, 2017 showed a slightly cooled market compared to 2016, but last year still represented the second best year on record by a large margin.

“We continue to see migration from the larger cities west of us, as home ownership in the pricier metropolitan areas are unattainable for many first-time and move-up buyers,” said Chilliwack and District Real Estate Board (CADREB) president Greg Nord-Leth.

“Also, when spring new construction ramps up, we may see some price correction because of increased supply. We are also watching for any provincial or federal incentives to help offset the effects of the newly tightened mortgage qualifications.”

While 2017 overall was slightly cooler than 2016, December 2016’s 204 home sales up from 165 for December 2016 could be a result of buyers getting in before the new mortgage rules.

“This may have been due to it being the last month of the less stringent mortgage qualifications,” Nord-Leth said. “Beginning this month, it is a much stricter ‘stress test’ to qualify for a mortgage. It will be based not only on what potential home owners can afford now, but what they would be able to afford if the interest rate goes up.”

Despite tougher mortgage qualification, CADREB remains optimistic about the coming year.

A month ago, the B.C. Real Estate Association (BCREA) issued a forecast for all boards in the province, and called for a drop in sales in CADREB in 2018 with a 4.3 per cent increase in price.

• READ MORE: High Chilliwack home prices, sales forecast to moderate

Provincewide, the BCREA forecast called for an 8.8 per cent decrease in sales by the end of 2017 and a further 10.4 per cent drop in 2018.

BCREA chief economist Cameron Muir based that estimate on rising interest rates and the stringent mortgage stress test.

As for the average price forecast, for the BCREA numbers to be correct, it would require a near freezing of current prices. The BCREA predicts an average sale price locally in 2018 to be $489,900. The average price of a home sold last month was $483,156, up 25 per cent over December 2016.

With an average increase in sale prices of two per cent per month in 2017, the BCREA forecast for 2018 is for just a 1.4 per cent increase on average for all of 2018.

As for the dearth of listings, Nord-Leth noted that with property assessments recently coming out, many homeowners were surprised by the rise in their property value. And while assessments are not directly linked to listing prices, it can spur homeowners to list.


@PeeJayAitch
paul.henderson@theprogress.com

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