One of the country’s largest real estate companies says government policies may finally be derailing the Vancouver housing market despite the fact the city is forecast to have the strongest local economy in 2017.

Royal LePage Real Estate Services is calling for an 8.5% price correction this year despite a forecast from the Conference Board of Canada which says British Columbia will lead the pack among municipalities in economic growth because of the construction, finance, insurance and transportation sectors.

“While efforts to address deteriorating affordability in Ontario and BC’s largest metropolitan areas are well-intentioned, too many new taxes and regulations, by too many levels of government, introduced within such a short timeline and with perceivably little research and consultation, have caused confusion and triggered drops in consumer confidence, risking the long-term health of Canada’s housing market,” said Soper, chief executive of Royal LePage.

The real estate company said in a release out Thursday that tougher mortgage insurance regulations, including more stringent stress tests and clearer rules on capital gains exemptions, are impacting the whole Canadian market, but in Vancouver the marketplace has also dealt with a new 15% additional property transfer tax on foreign owners and on Jan. 1 the city introduced a one per cent tax on vacant homes based on their value.

Royal LePage said a typical two-storey home in Vancouver sold for $1,640,757 in the fourth quarter, a 27% increase from a year ago but prices were falling from the third to fourth quarter — a development that seemed inevitable to the CEO.

“Eroding affordability in BC’s Lower Mainland has reached unsustainable ground. This, coupled with recently introduced public policy measures and lower sales volumes, has put visible downward pressure on home prices. While the cost of a home in Greater Vancouver will remain the highest in the country, a modest price reset will provide much-needed relief in the Lower Mainland and help reignite overall buyer activity in the region,” said Soper.

The so-called “price reset” will take overall prices in the Vancouver region to levels not seen since April, 2016.

Vancouver’s loss seems to be Toronto’s gain with the real estate company predicting 10% growth in prices in the region with the average Greater Toronto Area home selling for $793,000 in 2017, up from $720,761 in 2016.

“These two regions, often grouped together as Canada’s booming real estate markets, are on divergent path. Unlike Vancouver where a price correction is underway, there is no relief in sight for the GTA – forward momentum and supporting fundamentals in the region are that strong. And it is worth noting, Toronto area home prices are much lower that those on the west coast,” the CEO said.

Overall, the real estate company is predicting less disparity from region to region across the country, when compared to 2016.

The national forecast, based on the country’s 53 largest markets, called for a 2.8% increase in prices based on all property types — that compares with a 13% increase in 2016 that saw prices shoot up to $558,153 on a national basis.

New Forecast : Vancouver Home Prices to Drop in 2017 While Toronto Still On the Rise by Garry Marr | Financial Post