Beginning in March 2016, sales began dropping after a long period of sustained growth. But it wasn’t until July that many observers started noticing the slowdown, in part due to a less intense benchmark price growth.
It was also the month when the B.C. government introduced a 15-per-cent foreign-buyers tax aimed at limiting the number of offshore buyers, who many had blamed for rapidly escalating prices.
After the tax came into effect on Aug. 2, the Vancouver market hit a literal standstill as sales dropped and prices froze. The trend continued for the most part in September.
National Bank says there were several factors leading up to the March peak that contributed to the downturn.
For instance, the minimum down payment for insured mortgages was raised to 10 per cent from five per cent for homes priced over $500,000. Also, the B.C. government introduced a three-per-cent tax on homes sold for over $2 million.
The bank also cites China’s anti-corruption campaign for slowing the flow of capital out of that country.
But that didn’t stop prices from rising at an unprecedented rate. The Teranet-National Bank House Price Index showed an average monthly increase of 2.5 per cent from February through to August.
Now, with October almost at a close, the bank believes prices may finally start to catch up to all the other indicators of a collapsing market.
It is expecting the Teranet-National Bank index to show a decline of 10 per cent over the next 12 months, with detached home prices dropping 20 per cent, townhomes dropping nine per cent and condos falling five per cent.
That would send a $2 million house back down to the $1.5 million price point and a $1 million house would be about $730,000.
The report comes a week after real estate firm Royal LePage said Vancouver real estate had experienced its “final hurrah.”
CEO Phil Soper said home prices in Vancouver will slow or even reverse over the coming months, despite growing nearly 31-per cent year-over-year in the third quarter.
He added it can take about six months for prices to catch up with a change in demand and pointed to last month’s 32-per cent plunge in home sales in Greater Vancouver.
Furthermore, the latest on Canada’s housing market as a whole comes with a dire warning.
Canadian Mortgage and Housing Corporation CEO Evan Siddall said in an op-ed in the Globe and Mail this week that for the first time ever, the federal agency will be issuing a “red” level warning for the entire Canadian housing market.
According to CMHC, a “red” warning indicates evidence of problematic conditions in the housing market, including overheating of demand, price acceleration, house price overvaluation and overbuilding.
-With files from The Canadian Press, Leslie Young and Tania Kohut
© 2016 Global News, a division of Corus Entertainment Inc.