Housing Market Rises Despite Government Policies

INEQUITABLE ASSESSMENT

Property owners take heart from higher property values, which help to boost equity and in turn their borrowing power. Higher values also generate higher property tax revenues for local government.

But the province doesn’t seem to see things so positively.

The past year saw many farm property owners decry what they saw as a provincial effort to rein in farmland values by tighter regulations on the kinds of activities allowed within the Agricultural Land Reserve.

This month saw the release of the 2020 assessment roll and Municipal Affairs and Housing Minister Selina Robinson crow about the province’s success in reducing residential property values.

“This is a positive sign that our government’s efforts to make housing more affordable for more British Columbians are having a real impact,” Robinson said. “As we move into the next decade, we will continue our work to stabilize the market.”

Robinson’s pledge to double down on reducing residential property values isn’t sitting well with Paul Sullivan, senior partner with Burgess Cawley Sullivan & Associates Ltd. By his calculations, Metro Vancouver homeowners have seen $87.3 billion shaved off the value of their real estate since last year.

While the value of detached properties was hit hardest, strata properties also saw a significant loss in value.

“The large-scale destruction of home equity in British Columbia is resulting in significant financial challenges for many middle-class homeowners,” Sullivan said in releasing his analysis.

“Homeowners rely on home equity to cover unexpected health-care costs, renovations, fund their retirement and support their children’s education or down payment on a first home.”

He says the far-reaching effects also include compromising the ability of parents to fund home purchases by their children; in B.C., approximately 90% look to their parents for assistance with a home purchase.

Moreover, some recent homebuyers may find themselves owing more than their property is worth.

A sustained depression on the value of the property will make their financial arrangements more complicated – a significant price to pay for a social good that may not materialize.

Indeed, the province isn’t the only government seeking to depress residential property values. Ottawa is considering measures similar to those employed in B.C., and some municipalities are also looking at ways to rein in and even depress property values.

The lack of a co-ordinated response by the several levels of government threatens property values well beyond what any one government desires.

LOOKING AHEAD

Government measures notwithstanding, housing markets seem to be once more hitting their stride as 2020 kicks off.

The latest statistics from the Real Estate Board of Greater Vancouver indicate that residential sales through the board were 3% higher in 2019 than in 2018, at 25,351 units.

Sales strengthened through the latter half of the year, improving from 23.5% above a year earlier in June to 88% above a year earlier in December.

“Confidence in the market clearly has returned,” remarked Robert Hogue, senior economist at RBC Economics, last week. “All the recent policy and regulatory changes appear to be in buyers’ rear-view mirror now.”

Tempering the provincial government’s rosy view that housing prices have become more affordable, Hogue believes the Vancouver housing market is “quickly shifting in favour of sellers.”

Indeed, after declining for 16 consecutive months, the benchmark price began rising in October and ended the year down just 3% from a year earlier.

This was a shift from June, when the benchmark price was 9% below the previous year.

“Home prices are poised to maintain an upward trajectory in the period ahead – quite possibly rising above year-ago levels by the spring [or even earlier],” Hogue said.

“After seeing some affordability reprieve over the past couple of years, Vancouver buyers will again find harder to achieve their home ownership dream in 2020.”