'You're starting to witness the slowdown': declines expected in Wednesday's Vancouver real estate figures

People hoping for Vancouver's housing bubble to burst could find reasons to be optimistic.

Monthly real estate figures for the Lower Mainland will be released for every municipality, with predictions of significant drops in total sales compared to a year ago.

"When we look across most markets in B.C.over the first quarter of this year, sales are down," said Cameron Muir,chief economist at the British ColumbiaReal Estate Association.

Real estate agent and industry bloggerSteve Saretskysays the drop is largely due tonew mortgage stress test rules, but the cumulative effect of interest rate hikesand new housing taxes by the government are also playing a role.

"Prices can't rise by 30 per cent on an annual basis forever. The greatest price gains are behind us, and you're starting to witness the slowdown," he said.

"All those new policies coming into effect, I don't think, are bullish for real estate in the short term."

• 'Ignored for too long:' B.C. NDP government takes aim at housing costs with tax measures

Muir and Saretskysay industry data shows median prices for detached homesin Vancouver and surrounding municipalities are dropping slightly but that relief won't extendto the condo market, where the benchmark price of an average unithas increased by 31.1 per cent over the last year, to $641,800.

"I still expect prices to rise in most product types, and that's largely a result of a lack of supply. We're still sitting at 10-year lows," said Muir.

Effect of a slowdown?

An extremely robust housing market has greatly contributed to B.C.'s economy in recent years, with the real estate, rental and leasing sectors accounting for18.4 per cent of the province's GDP in 2016, according to Statistics Canada.

"There's no question that a slowing housing market could result in a slower economy. Does that leadto a recession eventually?" asked Saretsky.

• New mortgage stress test rules have borrowers flocking to alternative lenders

Last week, Muir published an analysis attempting to predict that possibility. The report estimatedthat a 35 per cent decline inaverage home prices would result in a recession, with GDP growth falling to negative 0.5 per cent within a year.

Unemployment, meanwhile, would rise from 4.9 to 7.5 per cent.

"Nearly 70 per cent of British Columbiahouseholds own their home. A relatively minor 10 per cent negative shock to home prices would extinguish $90 billion of their wealth, or $70,000 of the average home owner's equity," according to Muir's report.

• Chinese real estate portal says investment in Vancouver 'flat as a pancake'

"While some may see this as a paper loss, it will have a significant impact on the economy, as declining household wealth reins in consumer spending."