Sales of British Columbia real estate are anticipated to end the year down more than 34 per cent amid rising interest rates, according to the B.C. Real Estate Association.
And the organization’s third-quarter housing forecast predicts sales will slide by another five per cent next year.
“Mortgage rates have risen at a much faster rate and to a higher level than previously anticipated,” BCREA Chief Economist Brendon Ogmundson wrote.
“Faced with a dramatic shift in the cost of borrowing, housing market activity is likely to fall well below normal over the next year.”
The Bank of Canada hiked its benchmark interest rate by another 0.75 per cent on Wednesday, the fifth increase this year, to 3.25 per cent.
The move pushes variable rate mortgages up, with comparator site Ratehub.ca calculating that an owner of a $630,000 home with a 3.5 per cent mortgage rate will be paying about $2,832 more per year.
In its Wednesday statement, the central bank said due to rising mortgage rates over the past seven months, the “housing market is pulling back as anticipated,” calling the growth in home prices seen over the pandemic “unsustainable.”
The BCREA said slumping sales coupled with rising inventory have tipped some regions, primarily expensive areas, into buyers’ market territory.
Average home prices were also sliding from peak levels, it said.
The organization forecast sales in the popular Greater Vancouver market to end the year down 33.2 per cent, though average prices across all home types were still up 3.1 per cent over 2021 to $1.225 million.
For 2023, it forecast sales falling another five per cent with prices dropping 2.9 per cent to an average of 1.19 million.
Chilliwack was forecast to see the greatest sales decline this year, down 47.9 per cent, while prices were up 8.4 per cent to $789,200 this year. The association forecast sales would fall four per cent next year and prices drop five per cent to $750,000.
In the Fraser Valley, sales were projected to fall 41.6 per cent in 2022 with prices rising 1.6 per cent to $1.03 million this year. It forecast sales to fall by a further 9.7 per cent next year with prices falling 3.9 per cent to an average of $990,000.
Only the South Peace River region was forecast to end the year in positive territory, with sales growth of 11.5 per cent, along with price growth of 1.9 per cent to an average of $290,000. Even there, the association forecast a 16.7 per cent drop in sales next year, along with a 3.4 per cent drop in average prices.
Despite the slowdown, the BCREA is forecasting the downturn won’t be long-lived, with the province’s growing population expected to continue to fuel demand in the years to come.
– with files from Global News’ Craig Lord
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