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    2018-04-13 10:48:10 Posted By Amir Hamzehali


    The British Columbia Real Estate Association (BCREA) reports released today show that the new tax policies and stricter mortgage requirements combined with the higher interest rates have sharply curbed the housing demand. A total of 7,409 residential unit sales were recorded by the Multiple Listing Service® (MLS®) across the province in March indicating a 24.6 per cent decrease from the same month last year.

    At the same time, the supply of homes for sale across the province are at or near their lowest level since 2006. If this trend continues, the lower supply will still put upward pressure on prices in most areas, even though the housing demand is lower. It’s quite obvious that the government’s tighter mortgage rules have been a major cause for the large drop in supply of homes for sale, especially in re-sale market. A large supply of homes in the real estate resale market comes from up-sizers who are willing to move to a larger and usually more expensive property after selling their smaller home. Most of these types of sellers have foregone or postponed their move as they will not be approved for the amount of loan they require.     

    The stats also show a drop of almost 20% in total sales dollar volume to $5.39 billion from March 2017. The large drop of almost 1 billion in total sales dollar volume will result in millions of dollars less tax income for the government this year alone.

    It seems the new housing policies neither have made our real estate prices affordable for average people, nor have they increased the government’s tax revenues!                                    

    The government may claim the tighter mortgage regulations such as stress test will lower the home owners’ risk of defaulting on their payments if mortgage rates keep going up in future. However, these burdensome mortgage qualifications have also caused many purchasers to seek alternative mortgage options, such as, loans from private lenders carrying much higher interest rates and costs in comparison to conventional mortgages, and much higher risks as a result.

    These policies are also increasing the risk of our economy slowing down, as the sharp drop in real estate sales will definitely have a negative effect on our job market and gross domestic product growth! These policies also cause pent-up demand for real estate to form in the market, as people’s needs for home ownership will not go away simply by restricting them. The formation of pent-up demand will increase the risks of large jumps in real estate prices again in future.  

    The best way to control real estate prices without hurting sales volumes is to increase the real estate supply. This could be done by changing land zonings and increasing densities in areas that are suitable for development. Everyone knows the process to change zoning, construction and delivery of homes is time consuming. Implementing a good housing plan and strategy will set a pace for our new housing construction that will catch up with our population increase and house hold formation in future. Hopefully next time, our politicians will be focused more on policies that promote and increase real estate supply than policies that restrict and decrease real estate demand!



AMIR Hamzehali
2397 Marine Dr.
West Vancouver
BC, V7V 1K9