Vancouver’s house prices expected to remain high

Tuesday, December 21st, 2004

Prices likely to rise an average 4.5 per cent across Canada in 2005: real estate firm

Eric Beauchesne

OTTAWA — The three most expensive cities in which to buy a home next year will be Vancouver, Toronto, and Ottawa while the three most affordable will be Regina, Winnipeg, and Halifax.

Those are among the year-end predictions of a major real estate firm, which is also forecasting that housing prices will continue to easily outpace inflation in 2005, rising on average by 4.5 per cent.

While that’s less than half the projected 9.2 per cent increase in prices this year, it’s still roughly double the expected increase in the cost of living over the coming year.

Sales will cool next year, declining by one per cent to 457,325 but the average house price in Canada will rise to $236,588 from $226,400, Royal LePage said in its year-end forecast Monday.

“If 2004 represents a record pace in terms of volume and price increases, 2005 will represent a market in equilibrium where both buyers and sellers will equally share the benefits,” it predicted.

The increase in prices over the past year will cool sales activity while the relatively large number of homes on the market will keep a lid on prices, said Royal LePage president Phil Soper.

“We currently have the highest levels of listing inventory available in the past four years, and this will clearly have a mitigating effect on price increases,” Soper said. “Sound market fundamentals will support a robust 2005 housing market, but what will emerge is more normalized, sustainable housing market activity.”

Buyers will continue to benefit from historically low interest rates as the low cost of borrowing money extends homeownership to a majority of Canadians, it said. Interest rate increases are likely to be moderate, particularly in view of the strengthening Canadian dollar, and gradual increases will work to temper the current torrid pace of market activity.

The increase in prices for the nine cities included in the forecast survey are: Edmonton 7.0 per cent to $179,300, Calgary 6.2 per cent to $239,000, Winnipeg six per cent to $127,718, Montreal five per cent to $197,000, Regina five per cent to $118,125, Ottawa 4.5 per cent to $243,590, Vancouver three per cent to $399,000, Toronto 2.5 per cent to $323,000 and Halifax 1.7 per cent to $179,000.

The sound economic fundamentals that will support the housing market are an economy that should grow at close to its long-term pace of three per cent, low inflation, federal budget and trade surpluses, job growth, and strong consumer spending and business investment.

“Despite little change on the manufacturing side, overall job growth should continue, driven in large part by construction jobs thanks to the housing boom,” it said. “This translates into increasing personal disposable income and strengthens housing demand.”

The job growth and low unemployment in turn will buoy consumer confidence and spending, it said. Although consumer debt is at an all-time high relative to incomes, the forecast said that debt is manageable.

Population growth, thanks to immigration which will compensate for the relatively low birth rate, will continue to support housing markets.

“This growth is fundamental to our housing markets,” it noted.

The pace of housing construction could slow due to rising costs and and some increase in mortgage rates but the decline should be slight and not be enough to hurt strong employment in the construction sector.

© The Vancouver Sun 2004

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