The province was home to one of the country's most frenzied mortgage markets last year
As one of Canada’s hottest housing and mortgage markets in recent times, British Columbia is no stranger to the housing inventory issues that have been all too evident throughout the COVID-19 pandemic.
Prices surged and demand continued to boom in the province towards the end of 2021, with the BC Real Estate Association (BCREA) reporting in January that residential unit sales were up nearly 33% last year over 2020 and the average residential price had surged to $927,877 – a stunning 18.7% climb over the previous year.
That record activity was spurred by low supply right across the province, BCREA’s chief economist Brendon Ogmundson said, with that problem likely to spill over into 2022 as the mortgage industry gears up for another busy year ahead.
“Last year was a record year for BC home sales with seven market areas setting new highs,” Ogmundson said. “Listings activity could not keep up with demand throughout the year. As a result, we start 2022 with the lowest level of active listings on record.”
That lack of inventory has had a knock-on effect in some significant ways, with spiralling house prices meaning that the down payment required to purchase a property has become a formidable hurdle for many would-be first-time buyers.
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Angela Calla (pictured top), a Port Coquitlam-based broker in the Dominion Lending Centres network, told Canadian Mortgage Professional that while that had always been a challenge for new entrants to the market, the problem had become especially pronounced recently.
“What first-time homebuyers, or any homebuyers, are struggling with is the down payment,” she said. “That’s something that has been an issue for decades, but the numbers have never been so large.
“Three decades ago, people used to be able to get gifted $10,000 or $15,000. Now you have to [multiply] that all by 10 for inflation and looking at where the market is.”
With the path to home ownership becoming increasingly complex, Calla said that certain measures that could be imposed by the federal government – such as the mooted steps towards some form of home equity tax on primary residences – would be unwelcome developments.
While no move on that front has been announced, the Liberal Party vowed in its federal election manifesto last year to introduce an “anti-flipping” tax on residential properties being sold after less than a year, which was viewed in some quarters as paving the way for possible future capital gains taxes.
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Calla said that a tax on home equity could end up being a punitive measure against Canadians who are using the value of their homes to save, plan and prepare for the future.
“A home equity tax can be quite scary because for over 99% of us, we need a home for a place of security and shelter,” she said.
“Us having the discipline to save and the family planning to be able to have home ownership as a part of our goals, that is something that is a conscious choice that we make. You shouldn’t be penalized for that as well.”
Indeed, Calla said that 2022 could see a number of current homeowners decide to assess their home, with rapidly rising values meaning that they could have the ability to use the increased equity to their own advantage for a number of reasons.
That’s something that mortgage professionals should be aware of as a possible trend this year, with that re-evaluation giving Canadians the opportunity to consolidate debt, borrow for investment or improve their current property.
“I think that normalizing annual mortgage reviews is a very instrumental part of building and protecting your wealth, and I think that’s at the forefront of Canadians’ minds,” Calla said.
With the pandemic having accelerated the so-called “urban exodus” of people leaving urban centres like Vancouver for more remote areas, Calla urged brokers and their clients to remain attuned to so-called sliding scales, and the fact that different lending requirements will exist for different areas.
“I think paying attention to lenders’ sliding scales is very important. In smaller towns, sliding scale amounts might be less – so it’s really critical in your purchase planning to understand that everybody’s situation is unique, every province is unique, and every property can be unique,” she said.
