Home sales prices expected to moderate as interest rates rise, estate agent says
Owning a home in Prince George has become more expensive in 2021, according to a BC Northern Real Estate Board Report.
The costs of mortgage payments, municipal taxes and fees, and utilities for an average single-family home were 32.3% of median pre-tax household income, up from 30.6% in 2020according to the BCNREB’s annual report on housing affordability indicators.
The Canada Mortgage and Housing Corporation proposes a 30% threshold for housing affordability. However, Prince George realtor and BCNREB director Bob Quinlan says the measure is neither hard nor quick.
In the 15 years he was a mortgage broker, Quinlan said banks would approve mortgages provided principal, interest, taxes and heat amounted to no more than 35% of gross income and no more than 40% once all personal debt including credit card debt has been taken into account.
“If they get that 25% drop, they don’t have to follow CMHC guidelines, they follow bank guidelines,” he said and added that the so-called stress test between still in play. It requires potential buyers to demonstrate that they can afford the higher of two percentage points above the contractual mortgage rate or the five-year benchmark rate published by the Bank of Canada.
A typical single-family home sold for $458,804 in 2021a year-over-year jump of $50,861, according to figures from the city’s Multiple Listing Service.
Things haven’t improved since, as the average price reached nearly $520,000 during the first quarter of 2022.
With the Bank of Canada recently raising its prime rate by half a percentage point and expected to raise it another half a percentage point in the coming months, Quinlan predicted that prices would begin to rise. stabilize.
“But it will still take some time for interest rates to stabilize,” he said.
Quinlan said “fear of losing” or “fear of not getting into the market” combined with low interest rates was behind the upward trend in house prices in Prince George and around all the countries.
“Interest rates caused people to say ‘OK, I can get into the market’ and then everything was this frenzy, this feeding frenzy, that’s been going on for the last two years,” he said. declared.
For the northern British Columbia region as a whole, the index was 27.8%, up 1.7 percentage points from 2020. The average selling price was 406,535 $, up 13.5%.
At 51.8%, 100 Mile House had the highest index. The community saw a 21.6% increase in the average sale price, the largest increase in the region, reaching $410,600.
The next highest was Terrace at 33%. This community recorded the highest average price at $467,492.
By contrast, Burden in Fort St. John was the most affordable at 19.6%, up just 0.4 points from 2020, “largely due to weak house price growth.” .
In other communities, affordability was 32.2% in Prince Rupert, 29.4% in Quesnel, 29.3% in Williams Lake, 29.2% in Smithers and 21.5% in Kitimat.
For the first time, no community in the study recorded average prices below $300,000 and five were above $400,000, compared to just two in 2020.
At $340,028, Quesnel had the lowest average price. The second lowest was Williams Lake at $377,584.
Homeownership in all northern BC communities remained “very affordable, especially compared to the Vancouver area,” where it was 93.1%.
Mortgage costs are based on the average price of a home with a 25% down payment and are amortized over 25 years for a five-year fixed rate mortgage which, in turn, is based on monthly data from the Bank of Canada for a conventional five-year mortgage.
The median income is taken from the census taken in 2015 and adjusted by the growth rate of average weekly earnings for British Columbia as obtained from Statistics Canada.