Author: Kirsten Mason

This article appeared on the VancouverSun.com and was written by Brian Morton on September 15th, 2011.

Southwestern B.C. and the rest of the province increasingly have little in common when it comes to year-over-year home price changes, according to the latest numbers from the B.C. Real Estate Association.

While residential sales across the province remained stable in August as low mortgage rates were balanced by high numbers of active listings, average prices dropped in the Okanagan and most other interior regions in the past year while rising sharply in Metro Vancouver and the Fraser Valley.

There are many reasons for the price divergence in the two regions, including less migration to the Okanagan, fewer sales of recreational properties and a higher number of active listings there that quell upward pressure on prices, says BCREA senior economist Cameron Muir.

But Muir also noted in an interview that average prices in Metro Vancouver have been “skewed” for some time by the high number of sales of expensive single-detached homes in pricier neighbourhoods, although that’s changing.

“When we look at the Okanagan and the Kootenays, migration to the region is down. More importantly, purchases of recreational properties has not come back to the level we saw before the recession. And the Okanagan and Kootenays are still oversupplied markets.”

While the Metro Vancouver market remains strong, Muir said prices are starting to pull back as the proportion of single detached home sales in tonier neighbourhoods returns to historic norms.

He said that B.C. homes sales edged up one per cent in August compared to July on a seasonally adjusted basis and that low mortgage rates continued to underpin housing demand throughout the province in August.

He said that total active listings in the province remained elevated in August, as “most regional markets exhibited buyers’ market conditions, meaning little upward pressure on home prices.”

According to the BCREA survey, the average price in B.C. rose 10.7 per cent in August compared to August 2010 to $540,000 from $488,000.

However, price changes fluctuated sharply by region, with the Fraser Valley showing the sharpest increase of 19.7 per cent over the year, from $424,000 to $508,000.

Metro Vancouver prices rose 14.4 per cent from $681,000 to $779,000, while Victoria prices rose 13.7 per cent from $472,000 to $537,000. The rest of Vancouver Island showed a slight price drop.

However, Powell River showed the sharpest drop – 12.7 per cent, from $297,000 to $260,000 – while the Okanagan Mainline recorded a 0.3-per-cent drop in prices from $384,000 to $383,000 and the South Okanagan dropped 7.2 per cent from $331,000 to $307,000.

Year-to-date, it was more of the same, with B.C. recording a 14.7-per-cent price increase in the first eight months compared to the same period in 2010, Metro Vancouver recording a 19.2-per cent hike over that period and the Fraser Valley seeing a 12.6-per-cent increase.

However, the Okanagan Mainline saw a 2.5-per-cent decline in the six-month period and the South Okanagan recorded a 5.4-per-cent drop in prices.

Powell River saw an eight-per-cent drop in the six months, while Victoria recorded a 0.5-per-cent decline in the average price.

The Kootenay region recorded a 4.4-per-cent increase in August compared to August 2010, from $274,000 to $286,000, although the average price fell 3.5 per cent year-to-date.

The BCREA also said that the number of residential units sold in August compared to August 2010 rose 16.4 per cent, from 5,590 to 6,504.

To date, B.C. home sales have totalled $31.7 billion this year, up 17.7 per cent from 2010.

 

This article appeared on CBC.ca on September 15, 2011.

B.C.’s real estate market may be slowing down, but there is no sign Vancouver’s sky high prices are caught up in a bubble that is about to burst, according to a new report.

The Central 1 Credit Union report, which was issued on Thursday, forecasts the B.C. market will slow this year and total sales will drop slightly from 2010, but prices will continue to rise an estimated 6.8 per cent next year.

According to the report’s author economist Brian Yu, low interest rates that show no sign of rising quickly and the limited supply of land will keep values rising – all familiar arguments.

The British Columbia housing market will slow this year and total sales will drop slightly from 2010, says a new report by Central 1 Credit Union. The British Columbia housing market will slow this year and total sales will drop slightly from 2010, says a new report by Central 1 Credit Union. Jonathan Hayward/Canadian Press

But Yu says there is another important reason to believe prices in Vancouver are unlikely to collapse. Market speculation —commonly known as flipping — currently accounts for only about two or three per cent of the market.

Yu says that is a normal level, which shows most people are living in the homes they buy.

“Our research shows few signs that speculators are overly active in the Vancouver market, which means we are unlikely to see a speculation-induced bust,” he said.

“Even if the economy slows and employment slows, we expect to see individuals hold on to their homes, rather than sell them in a weaker market,” he said.

Prices may be way up for detached homes in Richmond, Vancouver and Burnaby, but Yu insists there hasn’t been a price surge across the region and concerns about a possible dramatic price drop in Vancouver are overblown.

“Price jumps that have received media attention have been in localized areas and we have not seen a region-wide price surge,” he said.
Market balanced says national report

That’s backed up the Canadian Real Estate Association’s monthly report, also issued on Thursday, that found a record 70 per cent of all local markets across the country are considered to be in balance.

Vancouver and Toronto’s share of provincial and national sales activity reached “unusually elevated” levels earlier this year, but has since pulled back into normal seasonal variations, the group said.

However, some observers said the market is eventually headed for a drop.

Fannie Fong of TD Economics said a peak-to-trough drop of roughly 10 per cent for both home sales and prices is expected, though that change isn’t expected until the Bank of Canada begins hiking interest rates in earnest in early 2013.

Just two months ago,BMO Capital Markets raised the spectre of a Vancouver price correction, but with a caveat: as long as immigrants with money continue coming to Vancouver, and interest rates stay low, prices in will stay high, said the BMO report.

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