% increase foreseen for 2007, putting average city home price at $543,240
Derrick Penner
Sun
The rise of British Columbia real estate values will be less than meteoric in 2007 as the unaffordability of property drags on some markets, a major national real estate firm predicts.
Re/Max, in its 2007 market outlook released Wednesday, noted that Greater Vancouver’s overheated market has begun to cool in recent months and predicts that trend will continue with fewer sales and an increase in new property listings.
The report, however, forecasts that B.C.’s economic conditions 2007 will remain strong, mortgage rates will remain low and demand will stay steady enough to push Vancouver values up a further eight per cent to an average $543,240.
In Victoria, Re/Max predicts prices will rise five per cent to an average of $440,000, and Kelowna will experience a nine-per-cent gain to reach an average $460,965.
Elton Ash, Re/Max’s regional executive vice-president in B.C., noted that eight-per-cent growth in prices is still strong performance. However, affordability is becoming the big question.
“Vancouver is one of the least affordable markets along with Toronto and Montreal,” Ash said.
“And that’s one of the issues [that could] put downward pressure on the market.”
Ash added that the Bank of Canada’s decision Tuesday not to raise its key lending rate of 4.25 per cent is a sign that Canada will see stable, low mortgage rates as well, which will help buoy B.C.’s real estate markets.
He added that new mortgage options being insured by Canada Mortgage and Housing Corp. and Genworth Financial, such as 30-to-40-year amortization periods, and segments where borrowers make only interest payments, should also help fill in the affordability gap.
B.C. markets outperformed Re/Max’s 2006 forecast. A year ago, the firm predicted that property values in Vancouver and Kelowna would increase by 10 per cent, not the 18 and 19 per cent respectively that they have gone up.
Ash said the 2006 forecast could not have predicted that inventories of property listings, particularly in Vancouver, would drop as much as they actually did in the first half of the year, which resulted in price-busting bidding wars.
However, he added that listings have increased — by four per cent in Greater Vancouver compared with last year and about 10 per cent in Kelowna — which has eased pressure in those markets considerably.
Arlene Butler, general manager of Re/Max Select Properties in Vancouver, said there has been a slight slowdown. The market isn’t has hotly competitive and buyers have more time to make decisions, but “we’ve still got lots of buyers and there is a lot of confidence.
“As long as the interest rate stays where it is, as long as we have the jobs here, the money is coming in.”
Andrey Pavlov, a business professor at Simon Fraser University serving as a visiting professor to the Wharton School of Business at the University of Pennsylvania, said he has revised his expectations for an affordability-induced slowdown to Vancouver’s market.
“I’m a little bit more positive on the market … now that things are settling down,” Pavlov added.
“Everyone says the market is a little bit cooler now [so] we might see a small correction, but that’s reason for optimism.”
Pavlov agrees with Re/Max’s assessment that the economic fundamentals in Canada, especially the western provinces, are strong enough to support some growth.
He added that the new, innovative mortgages will help ease the burden of Greater Vancouver’s phenomenally high prices.
“So I think [a price increase of] eight-per-cent is overly optimistic,” Pavlov said.
“Zero to three per cent or five per cent is more realistic, [or] possibly minus one or two per cent. But not too much worse than that.”
– – –
COOLER MARKET PREDICTED
The national realty firm Re/Max is predicting slower growth in B.C.’s hottest real estate markets. Affordability will be the main culprit for cooling prospects.
Forecast prices and MLS unit sales for 2007, with predicted % change
– Vancouver
$543,240, +8%
40,000, no change
– Victoria
$440,000, +5%
7,400. -8%
– Kelowna
$460,000 +9%
9,900, no change
– Calgary
$385,000, +10%
30,000, -8%
– Toronto
$371,000, +5%
78,000, -3%
Source: Re/Max
© The Vancouver Sun 2006