BC Real Estate
Association, VANCOUVER, B.C. – October 03, 2008 –
The average price chart for the Board tells the story of real
estate prices. Since 1977, the evidence is clear. For periods
in each of the past three decades there have been dips in
the market. The chart also illustrates that real estate has
consistently been an appreciating investment over time. The
degree of increase depends on the type of unit bought and
its location. The MLS® Housing Price Index tells this
story. If we go back five years to 2003, we see that a buyer
of a detached home on Vancouver’s Westside, or in West
Vancouver, would have an investment that has doubled in value
since then. A buyer of a home in Vancouver Eastside has seen
their home appreciate 83 per cent. In Coquitlam that same
house would be up 80 per cent. Squamish has had ta 33 per
cent price increase for a detached home since 2003, and Pitt
Meadows a 49.5 per cent increase. Condominium buyers have
fared even better over the past five years. Port Coquitlam
condominiums increased 116 per cent, Vancouver East condominiums
increased 110 per cent, New Westminster103.5 per cent, and
Richmond and Port Moody 101 per cent.
When did the present slowdown begin?
In August 2007, sales began to slow and by March 2008 prices
had begun to slow as well. In the last four months we have
seen about a three to four per cent reduction in residential
sales, depending on the property type. Last month, 1,568 homes
changed hands in the Board area, a decline of 53.5 per cent
from 3,384 sales in August 2007. At the same time, prices
began dropping which, in turn, began having a leveling impact
on house price appreciation.
Andrew Ramlo, an economist at the Urban Futures Institute,
believes we have to preface discussion of the slowdown with
the fact that for five to seven years we’ve had unprecedented
growth.
Why?
There are a number of reasons, but low consumer confidence
– it’s at a seven-year low – is the main
reason, according to Cameron Muir, Chief Economist at the
BC Real Estate Association. “Home buyers are cautious
not just because of news reports about the market downturn,
but because they’re seeing increases in staples such
as oil and food prices. As a result, they are reevaluating
their spending habits and their budgets.” Muir explains
that even a modest decline in the real estate market has a
psychological effect on potential buyers.
“If the price of gas falls anywhere in the Lower Mainland,
we see drivers lining up to buy more gas. If the price falls
again the next day, we see even more drivers line up to buy,
even if prices are expected to continue to decline.”
But with a house, it’s an entirely different psychology.
“A house is something we rarely buy, and right now we
see there is a tendency to put off that buying decision until
prices stop falling.” During a changing market, home
buyers are more apt to take a ‘wait and see’ approach.
This hesitance is having an impact on the local economy. A
decline in home sales and prices results in fewer housing
starts and construction employment, says Helmut Pastrick,
Chief Economist at Central 1. “This adds up to less
demand for a whole range of products and services –
from furniture sales to lawyers and notaries.”
What’s next?
Will the situation improve, continue to pause or lead to a
housing recession? Most economists are not forecasting lengthy
declines, though almost every major country is revising their
economic forecasts downward. “Overshadowing our growth
is the slowdown in the U.S.,” Ramlo says. However, the
underlying economic fundamentals remain strong in the province.
“Our economy is robust, our employment rate is stable,
and we expect continued growth in immigration.” Pastrick
expects home prices will likely continue to decline for the
rest of 2008 and through 2009 in most of the Lower Mainland.
“An important statistic will be the supply of homes
for sale. When this number begins to shrink, the bottom is
near.” Muir thinks that what will get the market going
is a supply adjustment. “This means fewer listings coming
on and remaining, a process that will play out and is now
underway.” In August, the the Real Estate Board Of Greater
Vancouver saw active listings decline 6.2 per cent from the
previous month.
