The Bank of Canada rate hike announced earlier Wednesday morning could continue to slow down the B.C. real estate market, according Royal LePage West Real Estate Services.
In a statement, the bank said the 0.25 per cent increase to a 1.75 per cent rate was in response to the recently signed trade deal between Canada, the U.S. and Mexico.
Adil Dinani, a realtor with Royal LePage, said although the rate hike meant the Canadian economy was moving in a positive direction, it could temper the B.C. real estate market.
“This is a marginal increase, but if you look at the past 12 months, we’ve seen rates move up over one per cent,” said Dinani.
“This does create some challenges on behalf of borrowers, [both] to get approved and to manage those increasing borrowing costs.”
Dinani said that the rate hike will likely have “compounding effect” on the housing market slowdown already caused by new mortgage rules and the anticipation of the NDP’s speculation tax.
The latest figures from the B.C. Real Estate Association show that residential sales were down by 33 per cent this September, compared to the same month last year.
In Greater Vancouver, sales dropped by 43 per cent and the South Okanagan saw a decrease of 49 per cent.
“They’re all leading towards a cooler housing market in Vancouver,” said Dinani.
“When you have a plethora of policy changes being thrown at any market, buyers take more of a cautious approach.”
Dinani cautioned that although a drop in the housing market may seem strange after a decade of near-constant growth, it is a normal feature of a cyclical sector.
“It’s normal for markets to have corrections and adjustments,” he said.
“These corrections are normal, natural and I would say healthy for the long-term sustainability of the market.”
In places like Greater Vancouver sales have dropped by more than 40 per cent compared to this time last year, but Dinani doesn’t foresee a crash.
“The narrative of why everyone was buying is still very much intact: the desirability of living in Vancouver, the political and fiscal climates are all very positive,” he said.
“I think we’re still going to see the demand from people that are migrating here.”
Dinani said most of the effect will be concentrated on those still looking to buy into the housing market, rather than those with mortgages.
“A lot of clients are on five-year fixed mortgages so this increase doesn’t impact them whatsoever,” he said.
“The group that it does impact are the group that took on variable mortgages… those folks will be marginally impacted on a monthly basis.”