Despite fears of the South Okanagan real estate market cooling from tighter regulations, sales in the region continue to grow.
The concern, in large part, came from the tightening of mortgage lending rules that took effect in January after the Canadian Mortgage and Housing Corporation said it saw some risky loans going through.
Similarly, hikes in Bank of Canada interest rates last year and again in January, measures intended to curb inflation, had local realtors fearful of tempered real estate growth this year.
That hasn’t happened — so far.
According to South Okanagan Real Estate Board statistics recently released, the first two months saw a total of about $150 million in sales, an increase of about 22 per cent over the same period in 2017.
That’s coming with an average hike of about 10 per cent in average sale price over January-February last year, largely coming from condos, but also with a small increase in actual sales.
“Similar to some markets, we saw sales spike in December and January, some markets in November, but for SOREB it’s really December-January, in fact, where sales spike before the B-20 guidelines came into effect,” said B.C. Real Estate Association economist Brendon Ogmundson.
The B-20 guidelines are new lending restrictions on low-ratio borrowers, typically considered lower-risk loans because they pay 20 per cent or more on their down payment, after CMHC reportedly continued “to see an increase in new low-ratio mortgages that have riskier characteristics.”
“You had a bit of a rush to get ahead of that implementation,” Ogmundson said. “What we saw, then, in February was sales kind of come off of that initial spike. So, while they fell about 15 per cent year over year in February, they were kind of just coming back down to normal.”
But while the actual number of sales declined in February over the year previous, the dollar amount sold increased nearly 13 per cent, with a spike in the average sale price.
“(If) the previous months kind of borrowed demand because of B-20, it’ll be interesting to see where we go from here, what the market looks like in terms of consumer demand, because we’ve got these tighter mortgage regulations plus higher interest rates,” Ogmundson said.
“To us that means that sales are going to fall off a little bit, but we’ll have to see in the next few months how much of an impact that’s going to have.”
Ogmundson added the housing supply is at a decade low “and getting lower” in the South Okanagan, and while there’s no shortage of housing starts in the province, with about 60,000 units currently under construction in B.C., that hasn’t been reflected in housing finishes yet.
“Although new listings activity is OK, it’s just kind of replacing — demand keeps eating up all those listings, so we’re not getting back to a normal level of supply,” he said.
The new mortgage rules and interest hikes — recently held steady with U.S. trade concerns, though BCREA expects more increases this year — could hold off on expanding demand to let the supply of housing catch up a bit, Ogmundson said. But on the other hand, they could also just displace demand down the affordability chain.
“We’ll see what the effects are, because there’s a lot of demand being supported by things that aren’t going away like just simple demographics. People are aging into the time of their lives when they tend to buy homes.”