CREDIT: Peter Battistoni, Vancouver Sun Re/Max Select Properties realtor Arlene Butler is still seeing multiple offers but fewer bidders for properties.

The average house price in Vancouver will break through the $400,000 threshold next year despite slowing sales, a national real-estate firm predicted Monday.

Re/Max Canada says the Vancouver market will end 2004 with average prices up 14 per cent to about $376,000, the largest annual gain in more than a decade.

Next year the real-estate franchising giant forecasts that the rate of increase will slow to eight per cent, pushing the average price past $400,000 for the first time to $406,000.

At the same time, home sales are slowing, in part because of rising new-home construction costs and bottlenecks in the approval process, said Elton Ash, regional director of Re/Max Western Canada.

Vancouver unit sales will finish this year at about 38,700, down one per cent from 2003, and are likely to fall another two per cent to about 38,000 in 2005.

Slowing sales and rising interest rates might be expected to put a damper on real-estate markets, said Tsur Somerville, director of the UBC Centre for Urban Economics and Real Estate.

“The underlying economic fundamentals do not suggest any kind of collapse of the real-estate market, but that doesn’t mean that prices can’t weaken somewhat — and it certainly doesn’t mean that you can’t have areas within the Lower Mainland that weaken substantially more.”

Somerville added: “An eight-per-cent gain in prices next year seems to me a bit in the high range. At the same time they’ve predicted a two-per-cent drop in transactions. That is not a pair of numbers one normally sees together.”

However, Kelowna-based Ash says B.C.’s rosy economy, coupled with employment and population growth, as well as strong consumer confidence, will drive prices higher.

“Purchasers awaiting a slowdown in 2005 should rethink their strategy, as the fundamentals are in place for Vancouver‘s real-estate market to maintain its current pace,” Re/Max states in its 2005 housing outlook, released Monday.

“Low inventory levels across all price ranges have many purchasers still waiting in the wings for the right product to come on-stream.”

There is a continuing sense of urgency in the marketplace, although conditions have slowed from the torrid pace set last year, said West Side Re/Max realtor Arlene Butler.

“We are not seeing the multiple offers to the degree we had earlier in the year, when it was nothing to have seven, eight, nine or 10 competing offers. Now we may have two or three competing offers,” said Butler, who sells many single-family homes in the $900,000 and $1 million price range.

“Vendors are being more price-conscious. If they listen to their realtor, I think they will probably get a better price than if they go on the presumption that people are still offering $50,000 over asking price. They are getting close to asking price.”

Condominiums now account for one in every four sales in the city, but, the report notes, the condo market in Vancouver’s downtown core has become “over-saturated” in the past couple of years and vacancy rates are creeping up.

“A growing number of investors are selling out before completion to cash in on price gains,” the report states. “Outside of the core, supply continues to keep pace with demand.”

Ash said Vancouver‘s downtown remains a highly desirable location, but prices are settling after increasing dramatically.

“If you bought something to flip for profit, you had better do it now, because prices are going to stabilize downtown, but not elsewhere.”

His concerns — about new-home inventory being crimped by shortages of development land, delays in the approval process and rising materials and skilled-labour costs — were echoed by Butler, who says some Vancouver builders are selling undeveloped land rather than waiting for permits.

“It is taking so long to get permits now in Vancouver,” Butler said.

“They see they can make some money on the land, so why would they go through with the building when construction material and labour costs are going up?”

Elsewhere in B.C., multi-family starts — townhouses and condominiums — are expected to exceed single-family-home starts for the first time in Kelowna‘s history. Sales of all home types in the area are forecast to grow by eight per cent in 2005 with the average price growing by 10 per cent to $257,000.

In Victoria, sales are forecast to slip three per cent, with prices climbing six per cent to $337,200.

Nationally, the average price is expected to post a six-per-cent increase to $237,900 in 2005 — topping this year’s record of $224,729 by more than $15,000.

Average price appreciation in 2005 is expected to be highest in Edmonton (12 per cent), followed by Quebec City (11 per cent), Kelowna (10 per cent), Halifax-Dartmouth and Vancouver (eight per cent), Montreal, Ottawa and Victoria (six per cent), Saskatoon (5.5 per cent), Calgary (five per cent), Regina (4.5 per cent), Toronto (3.5 per cent) and Winnipeg (three per cent).

Re/Max says Edmonton will also break through a major threshold next year with the cost of the average home surpassing $200,000 for the first time.

In other highlights:

– First-time buyers are expected to continue to fuel housing activity in major markets across the country, especially where job growth and historically low interest rates have boosted confidence and income levels.

– Move-up buyers will continue to enter the real-estate market in 2005 in record numbers, trading up to larger homes or more prestigious neighbourhoods.

– Luxury-home sales will continue to spiral upward, driven by demand from aging baby boomers.

– Older, established neighbourhoods in the central core of most major cities are expected to continue to experience tight inventory levels in 2005, prompting continued bidding wars.

– Investment-only real-estate purchases are expected to continue to taper as vacancy levels rise in markets across the country.

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CROSSING THE THRESHOLD:

An average home in Vancouver is expected to appreciate eight per cent next year and sell for a record $406,000, despite a reduction in the number of houses sold.

Vancouver

$329,447 2003 Actual

$375,800 2004 Estimated +14%

$406,000 2005 Forecast +8%

City 2003 2004 Chng 2005 Chng

Kelowna $197,538 $233,600 18% $257,000 10%

Victoria $280,624 $318,000 13% $337,200 6%

Canada $206,393 $224,700 9% $237,900 6%

Source: Canadian Real Estate Association (CREA), Toronto Real Estate Board (TREB), RE/MAX, N. Barry Lyon Consultants Ltd.

© The Vancouver Sun 2004