Housing prices are due to slow but equity will continue to increase

Wednesday, February 28th, 2007

Jim Jamieson

The CMHC’s Robyn Adamache offers reassurance to prospective homeowners in Vancouver yesterday. Photograph by : Nick Procaylo, The Province

B.C. housing prices are headed for a soft landing, a market analyst told attendees at the B.C. Real Estate Convention yesterday.

But those forced by skyrocketing prices in recent years to watch from the sidelines may have to be willing to accept less in exchange for home ownership.

“It’s a relief that we’re not going to see 15 or 16 per cent [annual housing price] growth, but prices are still going to rise,” said Robyn Adamache, senior market analyst for Canada Mortgage and Housing Corp., following her address at the Vancouver Trade and Exhibition Centre.

“That’s why we’re seeing 80 per cent of our starts in the multiple unit area. People come here from other parts of Canada and they are astounded by the number of condos, but it’s a fact of life here.”

Recently, a major development was announced in Surrey’s Whalley area that offered entry level condos at $119,900 — although at a micro-size of 416 square feet.

With the average price of a single-detached home in Vancouver hitting $730,000 — as compared to $460,000 in Toronto and $350,000 in Calgary — according to CMHC, it’s no surprise that developers are building more condos with no sign of market overload.

Adamache said that at the end of December there were just 86 new, unsold units available in Greater Vancouver, most of which were in Surrey, Langley and Delta. There were fewer than a dozen in Vancouver and none downtown.

“If you wanted to move into a brand-new unit today, you’d be out of luck,” she said.

“You’d have to look at pre-sale.”

Adamache said historically low interest rates, record low unemployment and net in-migration will keep the real-estate market bubbling along.

She said the retail market in B.C. had record sales in 2005, with 106,000 units changing hands, but fell off last year by five per cent.

Both the Fraser Valley and Greater Vancouver were off 10 per cent last year.

“Slowing sales are mainly due to the fact that prices are getting to the point where people who are on the fringes of being able to afford to get into the market are having to wait,” she said.

“It should be good news for consumers that prices will slow going forward. For those already in the market, fear not. Your equity is still going to keep increasing.”

Adamache said the CMHC forecasts the average five-year fixed mortgage rate will drop 25 to 75 basis points in 2007, with a slight up-tick of 25 to 50 basis points in 2008. Looking out to 2012, rates are forecast to stay flat, below seven per cent.

Adamache also predicted moderation in the new-home construction market in B.C. after a six-year run-up to a high last year of more than 36,000 new units.

“We expect the resale market to slow,” she said. “And builders are facing construction-cost increases of one to two per cent per month, a shortage of skilled trades and land availability.”

© The Vancouver Province 2007


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