The number of home sales in Vancouver took a serious tumble last month. The Real Estate Board of Greater Vancouver said sales fell nearly 40% in January from the same month a year earlier.
Only 1,103 homes were sold in Metro Vancouver last month, down 39.3% from January 2018. According to the board, that’s 36.3% below the 10-year sales average for the month, making it the worst January for sales since 2009.
That’s the year-over-year calculation. Month-over-month, January home sales were actually up 2.9% from December 2018.
Home prices have also been falling in the region over the past seven months.
The composite benchmark price for a property in Vancouver dropped 4.5% from a year ago, to $1,019,600. That includes detached properties, townhomes and condos.
The benchmark price of an attached home last month fell 0.3% year-over-year to $800,600, while the benchmark price of a condo fell 1.7% to $658,600.
Those decreases can be traced back, at least in part, to the federal government’s mortgage stress test — introduced on Jan. 1, 2018 — that has made it significantly harder for people to qualify for mortgages.
“Today’s market conditions are largely the result of the mortgage stress test that the federal government imposed at the beginning of last year,” the board’s president, Phil Moore, said in the report. “This measure, coupled with an increase in mortgage rates, took away as much as 25 per cent of purchasing power from many home buyers trying to enter the market.”
The Office of the Superintendent of Financial Institutions (OSFI) is beginning to face pressure from banks and mortgage industry lobbyists to ease the terms of the stress test, which was initially designed to ward off risky lending.
It requires banks to test borrowers’ ability to repay a mortgage at either the bank’s five-year posted rate, or two percentage points higher than the rate their bank or broker offers them — whichever one is higher.
According to the Financial Post, “one source with direct knowledge of the matter said the regulator is reluctant to meddle with a test it introduced only 13 months ago.”
But Toronto-based mortgage broker Ron Alphonso told the Post that the stress test should be adjusted to account for interest rate hikes.
“As the interest rates keep climbing up it doesn’t make sense to keep the current B-20 rules in place,” he said. “We shouldn’t be penalizing people artificially.”
The Post asked OSFI if it would consider making amendments to the test. The financial regulator said it “monitors the environment on a continual basis and will make adjustments to its guidance when appropriate.”