Category: B.C. Real Estate News

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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Vancouver, BC – September 14, 2011. The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential unit sales in the province rose 16.4 per cent to 6,504 units in August compared to the same month last year. The average MLS® residential price climbed 10.7 per cent to $539,953 last month compared to August 2010.

“BC home sales edged up one per cent in August compared to July on a seasonally adjusted basis,” said Cameron Muir, BCREA Chief Economist. “Low mortgage interest rates continued to underpin housing demand in the province last month.”

“Total active listings in the province remained elevated in August,” added Muir. “Most regional markets exhibited buyer’s market conditions, meaning little upward pressure on home prices.” Year-to-date, BC residential sales dollar volume increased 17.7 per cent to $31.7 billion, compared to the same period last year. Residential unit sales increased 2.6 per cent to 55,132 units, while the average MLS® residential price rose 14.7 per cent to $574,962 over the same period.

This article was written by Dirk Meissner of the Canadian Press and appeared on CanadianBusiness.com on August 31st, 2011.

VICTORIA – The B.C. economy is in for a period of minor ups and downs for the next 18 months, but last week’s voter rejection of the harmonized sales tax is not enough to plunge the province into economic limbo, say economists and business leaders.

The real estate and housing industries could take a hit as British Columbians wait until March 2013 to save seven per cent on new home purchases or renovations.

But the province’s resource industries could offset those consumer-purchase decisions by ramping up company equipment purchases over the next 18 months, say economists.

Purchases by businesses are eligible for across-the-board tax credits under the HST, but once the PST returns, they will have to pay the seven-per-cent tax in most cases.

“Are you going to stop going to a restaurant until the HST disappears?” asked Simon Fraser University economist John Richards, who suggested that’s unlikely.

But he added: “I suppose there will be some concern about adjusting the timing of the purchase of a house in order to maximize the tax liability.”

Under the HST, homebuyers are charged an extra seven per cent tax on homes priced more than $525,000. Homebuyers are eligible for a tax rebate of up to a maximum of $26,500 under the HST.

Once the PST returns, the seven per cent tax disappears.

Richards, who helped write the independent panel report for the government that examined the impact of the HST, said the HST shifts more taxes to consumers, but it benefits consumers and the economy.

The report, which convinced the Liberals to propose dropping the HST to 10 per cent from 12 per cent, concluded that the move back to the former PST will likely have a negative impact on business and investor confidence because of uncertainty over tax policy.

The panel report concluded the HST would result in a $2.5 billion increase in the B.C. economy by 2020, resulting in 1.1 per cent higher growth.

But Richards said recent criticisms of the government’s 18-month transition timeline by former premier Bill Vander Zalm and Opposition New Democrat Leader Adrian Dix perpetuate the misconceptions about the HST.

Vander Zalm and Dix have said it should take less time to reinstate the PST.

Richards said 18 months is likely reasonable.

“It’s all an indication of the hysteria that was generated around the debate over the last two years that the sky was going to fall because of this new tax,” he said.

Herb Schuetze, a University of Victoria economist, said the transition period back to the PST will likely influence some consumer purchasing decisions, but the impact of those decisions is likely to register only minimally on the economy.

“You might just hold off and that can have some consequences in the short run for the province,” he said.

Schuetze said he doesn’t believe the government is delaying the transition period on purpose, especially with growing speculation of an early provincial election.

“From a political point of view, I don’t think they have much to gain from stretching it out,” he said. “They came out quite quickly to say they were going to re-establish the PST, when my own opinion as an economist would be to re-think the way that people in B.C. are taxed.

“This might be an opportunity to think about, perhaps, changing the provincial sales tax in a way that captures some of the benefits of the HST.”

B.C. Chamber of Commerce president John Winter said he’s been polling his members for direction on the wind-down of the HST because some businesses want the tax to stay as long as possible while others want to fast-track the transition.

Winter said he’s ready to work with the province on the transition, but he’s getting mixed signals from business.

“There’s going to be a major economic impact of this hurry-up” as major businesses purchase equipment to take advantage of the tax credits, he said.

“There’s also going to be a major economic downturn for consumers reluctant to make major purchase decisions knowing that the price will change because of harmonization leaving.”

Winter said he understands that it will take 18 months to re-introduce the PST, but he wants the government to modernize the old tax.

“If they stick to their guns and say nothing is going to happen for 18 months, that may not be very practical,” he said. “Maybe there’s ways to work around that in certain sectors of the economy.”

Richards said there may be a business appetite to change the PST, but politics is playing a larger role in the government’s decision to stick with the old tax as is.

“I would say don’t tamper with it,” he said.

“You immediately raise another hornet’s nest of political opposition. I feel confident in 10 years time, when the dust has settled on this debate, a future government will reconsider and probably reintroduce the HST.”

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