The impact of the coronavirus outbreak on the housing market of British Columbia remains uncertain, but analysis of possible scenarios paints a need for a lower qualifying rate for home loans for prices to recover.
According to the British Columbia Real Estate Association (BCREA), the COVID-19 outbreak is occurring at a time in which the province's housing markets are recovering from a two-year slowdown. This recovery is supported by the growth in home prices due to the lack of supply of homes.
However, taking into consideration the impact of the COVID-19 on the economy, the turnout in the next coming months could remain muted.
Also read: COVID-19: How real estate agents can keep safe during the outbreak
"Unsurprisingly, the results of our simulations show a steep decline in home sales in the second quarter of this year as economic activity becomes eerily quiet," said Brendon Ogmundson, chief economist at BCREA.
Still, Ogmundson expects home sales to slowly recover from the quarter. However, this growth will remain below the baseline for the year.
A more profound and more prolonged recession could derail this growth, with home sales falling 20% below the baseline for the remainder of the year.
Ogmundson said the pass-through of falling interest rates to the qualifying rate makes a large difference.
"Our simulations show that a much lower qualifying rate would lead to home prices in some BC markets ending the year higher than our pre-COVID-19 baseline," he said.
Ogmundson said if the growth outlook deteriorates, the housing market "may need a lower qualifying rate to fully recover."