The B.C. Real Estate Association (BCREA) has released its housing forecast for 2018.

The prognosis doesn’t look good for those thinking about buying a home next year in the Lower Mainland.

For one, prices are expected to continue rising.

In addition, it will be harder to get a mortgage next year because of tighter federal regulations taking effect starting on January 1, 2018.

If that is not enough to make things difficult for prospective home buyers, interest rates are also expected to go up next year.

If it’s any consolation, the BCREA says that increases in home prices will be “modest”.

According to the association, average home prices in Metro Vancouver, Fraser Valley, and Chilliwack area are anticipated to increase by four percent and up to six percent.

In Greater Vancouver, an average home is expected to cost $1.08 million in 2018, up 5.5 percent from the anticipated $1.02 million price in 2017.

In the Fraser Valley, an average home is forecast to fetch $739,900 in 2018, representing a five percent increase from the expected average price of $705,000.

In the Chilliwack area, an average home is anticipated to cost $489,800 next year, up by 4.3 percent from $469,400 expected price in 2017.

“While provincial economic conditions appear to be on a sound footing, the housing market will face increasing headwinds in 2018,” the BCREA states in its housing forecast. “A rising interest rate environment will certainly erode affordability in the new year, while tougher mortgage qualifications for conventional mortgagors will reduce their purchasing power by up to 20 per cent.”

“In addition, the high level of net migration from other provinces, especially Alberta, over the past few years is expected to wane, which will slow overall population growth,” the forecast continues. “These factors will likely be exacerbated by home prices that are already elevated after several years of significant rates of growth.”

The BCREA also recalls that the Bank of Canada has raised its overnight interest rate twice this year, bringing it to one percent.

“Further rate increases are likely over the next year, which are expected to push the average 5-year fixed mortgage to 3.44 per cent and the 5-year mortgage qualifying rate to 5.15 per cent by the end of 2018,” states the association’s housing forecast.

Adding to the woes of prospective home buyers is the tightening of mortgage rules.

Starting next year, borrowers previously exempted from more rigorous screening because they can pay a down payment of at least 20 percent of the purchase price will now have to undergo a stress test. This means that they have to qualify at either the five-year benchmark rate published by the Bank of Canada or the mortgage rate they got from their lender, plus an additional two percent.

“While we expect these new qualifying rules to slow home sales, home prices may not be affected as a result of low existing supply in the market,” the BCREA notes in its forecast.