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The latest CMHC update shows that over the past six months, the degree of vulnerability in Vancouver’s housing market has eased to a ranking of 'moderate' risk, after a sustained ranking of 'high' risk.JONATHAN HAYWARD/The Canadian Press

Vancouver’s housing market is stabilizing, new data show, indicating that the affordability crisis driven by an overheated real estate market is on the wane.

B.C. Finance Minister Carole James welcomed the findings in the new report from the Canada Mortgage and Housing Corporation, even though it spells fiscal challenges for her government.

The latest CMHC update shows that over the past six months, the degree of vulnerability in Vancouver’s housing market has eased to a ranking of “moderate” risk, after a sustained ranking of “high” risk. The vulnerability rating considers a range of factors, such as price acceleration and overvaluation, and for at least three years, Vancouver’s housing market has been in the red zone.

Ms. James, in an interview, said the findings show her government’s housing plan, which includes spending on affordable housing as well as tax measures designed to curb speculation, is moderating the market. “It’s a positive sign,” she said. “I am cautiously optimistic that we are going in the right direction.”

But the windfall of government revenue from property transfer taxes is shrinking as well, and Ms. James says that is a downside she embraces. “Yes, it was very nice to have billion-dollar surpluses, but the danger of that is that people couldn't afford to live here.”

In her most recent fiscal update, Ms. James noted that revenue from the property-transfer tax is lower than forecast, because of slower activity in the housing market. In the first three months of of the fiscal year, those revenues declined by $475-million, to $1.4-billion. That sharp adjustment forced Ms. James to raid the contingency fund to keep the budget in surplus.

The province introduced a 30-point housing plan in 2018 that was designed to tackle housing unaffordability that was felt most deeply in the Metro Vancouver region, but also in communities such as Kelowna and Victoria.

The measures include a foreign buyers’ tax, the speculation and vacancy tax, and changes to the school tax. As well, the province promised to increase housing supply.

The government was seeking to cool down speculation without causing a crash. Ms. James said the state of the real estate market is not just a challenge for those looking for housing but for the broader economy as well.

“Yes, it’s a challenge to deal with the property-transfer tax drop from my perspective, but it was a challenge that had to be addressed to be able to build a sustainable economy," she said, "not a hot speculative economy that had a potential for crashing and was causing other economic challenges for us.”

A new report from Landcor Data Corp. shows the median detached home in Greater Vancouver now sells for $1.2-million, a drop of 13 per cent compared with the same time one year ago. “Fundamental economic conditions are quite favourable: Weak sales are occurring because policies of the federal and provincial governments are weighing heavily on home buying in British Columbia," Landcor analyst Will Dunning wrote in the the Nov. 15 report.

“It is tempting to see falling house prices as a positive event, as this will contribute positively to affordability, and help make home ownership more accessible. But there are downsides to falling prices,” he added, as uncertainty about prices likely will deter home buying, and may negatively affect consumer confidence.

Helmut Pastrick, chief economist for Central 1 Credit Union, was also cautious in estimating the impact of a cooling market. “It eases the affordability crunch, prices are no longer going up, that’s viewed by some as a good outcome,” he said in an interview.

Mr. Pastrick said the province’s measures are only partly responsible for the moderation of housing prices. “To some extent, the taxation measures did bite into sales demand, but I think the greater impact came from the [federal government’s] mortgage stress test."

He said any significant swings in the market can create winners and losers. “Ideally a market should churn along at a reasonable pace without rapidly accelerating or rapid decelerating, but that rarely happens in the housing market.”