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Despite ongoing uncertainty in global financial markets and rising mortgage rates in Canada — which are expected to keep climbing — home sales in British Columbia are still strong.
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A new quarterly report from the British Columbia Real Estate Association (BCREA) suggests that mortgage rates in Canada will likely continue to rise throughout 2022 and 2023.
Global financial markets have been extremely volatile over the past several months due to a mix of factors, including the rapid spread of the COVID-19 Omicron variant, Russia’s invasion of Ukraine and elevated inflation. Throughout the world, rising inflation has led to corresponding rises in interest rates.
In January, consumer price inflation in Canada hit 5.1% (on a year-over-year basis), representing a 30-year high. One result is that the Bank of Canada has adopted an aggressive schedule of rate increases.
Fixed mortgage rates in Canada started increasing in late 2021, and they are now back to the pre-pandemic level of 3%. The BCREA is predicting the five-year fixed rate to reach approximately 4% in 2023. Variable mortgage rates are climbing in a similar fashion.
The BCREA points out that it’s also possible Russia’s invasion of Ukraine could cause continued uncertainty in the global financial markets, which could slow the Bank of Canada’s expected rate increases.
For those currently planning to buy or sell a house or condo in British Columbia, the BCREA says that sales activity remains strong.
In February, the Multiple Listing Service (MLS) recorded 8,902 residential unit sales in the province. Even though this number represents a decrease of 18.8% compared to February 2021, it still indicates a high level of demand in this sellers’ market.
“While sales are not keeping pace with the unprecedented level of activity we saw this time last year, demand continues to be quite strong,” said Brendon Ogmundson, Chief Economist of the BCREA, in a statement. “There are some encouraging signs that listings are recovering from historical lows, but there is a very long way to go before markets achieve balance.”
Across the province, active listings sat at 16,000 for the month, which is 19% lower than a year ago — and far below the 40,000 listings required to be considered a balanced real estate market.
And here’s some truly disheartening news for BC home-buyers who don’t happen to be millionaires: The average MLS residential price increased 24.9% compared to a year ago, from $887,866 to $1.109 million.