Housing market slides further in December

British Columbia’s housing sales decline deepened in December, capping off the weakest year of sales since 2013.

Following November’s 5.2% slump, seasonally adjusted home sales fell another 4.1% in December to 5,722 units. This was the lowest single-month tally since March 2014. Eight of the province’s real estate board areas contributed to the decline, led by Greater Vancouver and Vancouver Island excluding Victoria. Unadjusted for seasonal factors, December’s 3,499 sales were down 39% year-over-year.

Annual sales declined by nearly a quarter to 78,347 units, compared with an 11% national decline. Real estate boards in the Lower Mainland-Southwest drove B.C.’s sales decline with drops of nearly 30%, while the Okanagan area and Vancouver Island dropped about 20%. Federal mortgage stress tests have had a more pronounced effect in B.C., reflecting higher prices in the region and already strained affordability. Demand was further curtailed by various provincial tax measures.

Ongoing sales erosion and rising inventory portend further price declines. While the average annual price rose 0.4% to $712,497, the trend has eased. Seasonally adjusted, the average provincial price fell 2.6% from November to $701,383, owing mostly to a drop in the Lower Mainland markets. Average values are declining in the Lower Mainland-Southwest with low demand and rising inventory, and are also falling in Victoria and parts of the Okanagan. Factors such as weak Alberta demand and tax hikes for out-of-province owners in some markets of the Interior are further weighing on demand and prices.

Low sales and flat prices are forecast for 2019. While interest rates are forecast to be steady, with a chance of temporary cuts due to declining bond yields, most factors will lean against a significant rebound, including moderating economic growth and restrictive government policy. Total provincial sales are forecast to rise about 3% to 81,000 units this year, with the average price forecast to decline by about 1.5%.

During December, B.C.’s consumer price index (CPI) increased a modest 0.1% over November. However, the conventional year-over-year measure of CPI inflation rose 3%, up from 2.4% in November. The household operations index was 5.3% higher than last December due to a jump in prices for telephone services and internet access services. Child-care and housekeeping services prices were 8.1% higher than in December 2017. The transportation index was up 4%, mainly on higher air travel prices. •

Bryan Yu is deputy chief economist at Central 1 Credit Union.