Housing: But local experts take issue with bank’s conclusions
Ashley Ford
Province
Sign at 1435 Nelson in Vancouver offered lower price yesterday. Photograph by : Gerry Kahrmann, the province
Vancouver economic analysts aren’t banking on suggestions from the Toronto-Dominion Bank that the city’s vibrant housing market is vulnerable to a sharp price moderation.
David Baxter, executive director of the Vancouver-based Urban Future Institute, doesn’t buy one bit of the TD report released yesterday.
“There is no bubble,” he said. “This housing market is simply not going to collapse and neither will we see any sharp price drops in the immediate future. I certainly see no meltdown at all; however, we are not going to see the huge price gains we have seen in the recent past either,” Baxter said.
“When you look at the overall picture, the B.C. economy is strong, household incomes have increased, interest rates are stable, the housing market is very steady and there is little speculation in it,” he said.
“My only real concern is that the Chinese economy maintains the ability to turn out the manufactured products the rest of the world wants. That is what drives our economy to a large extent,” he said.
The TD report by economists Craig Alexander and Steve Chan said that “recent dramatic price gains in Vancouver and Calgary are unsustainable and that these urban centres are vulnerable to significant moderation, including the possibility of a pullback in prices at some point in the future.”
Alexander and Chan say the housing market has been particularly explosive in Calgary and Vancouver, driven by the oil boom in Western Canada. Consequently, these cities are most likely to see a drop in prices.
The pair say demand for housing in Vancouver has been softening since the beginning of the year and that price appreciation has plateaued, but has done so at an extremely elevated pace of 20 per cent, year over year.
“In six of the last seven months, units sales have been virtually flat or negative on a year-over-year basis. This suggests that while it is still a seller’s market, the balance between supply and demand has improved,” they added.
David Hobden, an economist at the Central Credit Union, also dismissed the TD report.
“I simply don’t agree with their speculation about Vancouver,” he said.
“They appear to be basing their premise on the belief there will be some shock to the Western Canadian economy such as sharply rising interest rates or a major drop in oil price,” he said.
“That is simply not in our forecast horizon. So it is hard to imagine a shock that will make that happen,” he said.
He agreed with Baxter that the period of sharply rising house prices is over.
“Price inflation has peaked for this cycle, but we are not going to see a price fall off overnight,” Hobden said. “It will take some time and eventually increases could fall to the one to two per cent level.” He expects that to occur by 2008 at the earliest.
© The Vancouver Province 2006