British Columbia is relying on pending changes to Canada’s mortgage stress test to tamp down demand in its heated housing market, with the provincial budget opting out of any new real estate taxes in favour of continuing to fund more supply.
Finance Minister Selina Robinson said Tuesday at the release of the B.C. NDP’s first budget as a majority government that the “incredible activity in the marketplace” surprised everyone when home sales began soaring as the province emerged from a COVID-related lockdown last spring.
Budget documents say low interest rates and wealthy remote workers looking for more space contributed to a 21-per-cent spike in home sales last year compared with the year prior, with 94,000 units changing hands. During that period, the average sale price of a home on Canada’s West Coast rose 10 per cent to $781,759. The budget predicts 4,000 more homes will be sold this calendar year compared with last before overall sales and winning bids decline slightly in 2022.
Ms. Robinson said her government isn’t going to intervene before that happens to try to slow prices during their current ascent, adding her government already targeted demand through its speculation and vacancy tax and school tax on homes worth more than $3-million, both introduced with the 2018 budget.
She predicted some federal help in June, when fewer people will be seeking pricey single-family houses once Canada’s bank regulator imposes a higher threshold to qualify for a home loan.
“We are seeing increased demand, but we also suspect that with the increase in the stress test and the changes there, that’s going to have some impact on shifting the demand,” she told reporters at a budget press conference.
Meanwhile, Ms. Robinson said, the NDP government is continuing its decade-long plan to build 114,000 new units of housing for families earning a median household income or less, Indigenous people, students, homeless people, and women and their children fleeing domestic violence. She said Tuesday that 26,000 units are now complete or under way. That tally was 23,000 last February, when The Globe and Mail checked in on the progress of this plan introduced in 2018.
The New Democrats originally budgeted $6.2-billion to finance 38,900 of these units during this period and are counting on the remainder to be built by private and non-profit housing developers, federal and municipal governments, as well as churches and other religious institutions.
Paul Kershaw, associate professor at the University of British Columbia’s population and public-health faculty, said the province is so unaffordable in part because the rental and real estate industries represent about 18 per cent of its GDP, but they only employ about 2 per cent of the people living in B.C.
“We’re driving our major cost of living to grow our economy and our earnings are not keeping pace,” said Prof. Kershaw, who founded the Generation Squeeze group aimed at increasing the equity for younger people.
Prof. Kershaw said B.C. should increase its surtax on luxury homes to invest into funding more rental and co-op housing.
Jill Atkey, chief executive officer for the BC Non-Profit Housing Association, said she was pleased Tuesday’s budget increases focus on building more homes, but investment in affordable housing will need to be scaled up significantly beginning next year if the government won’t take further measures to cool the market as prices rise.
“It’s safe to say affordability has worsened during the course of the pandemic and we’ve got so many more people priced out of home ownership – that puts tremendous pressure on the rental market,” she said.
Brendon Ogmundson, chief economist with the B.C. Real Estate Association, an industry group for the province’s 23,000 realtors, welcomed the $2-billion in new provincial housing loans first announced last week, saying it will jump-start the construction of thousands of new units. Still, he said, the province needs to help improve the slow pace of project approvals at the city level by creating training and a best-practices guide for streamlining urban planning processes and cutting down on unnecessary public hearings.
Mr. Ogmundson added, in an e-mailed statement, that the mortgage rules singled out by the provincial Finance Minister are a relatively minor policy tweak that is unlikely to have a significant impact on the hot housing market. The new qualifying rules will only lower a buyer’s purchasing power by about 4 per cent, he said. When the initial stress test was implemented in 2018, he said, it lowered that purchasing power by more than 20 per cent.
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