Derrick Penner
Sun
A major real estate company is predicting that housing prices in major British Columbia markets will continue to increase at a higher rate than the national average.
The prediction, released Tuesday by Re/Max, matches similar forecasts by Canada Mortgage and Housing Corp. and Credit Union Central B.C. chief economist Helmut Pastrick.
Re/Max’s outlook found that “the vast majority of major Canadian markets surveyed are expecting modest price appreciation ranging from two to five per cent.”
“The only exceptions are Vancouver, Kelowna and Calgary,” the report said, where the firm expects prices to rise in the range of 10 per cent. Victoria home prices are also expected to appreciate five per cent.
For Greater Vancouver, Re/Max’s estimate is for the average price for a home to reach $462,000 in 2006. In Kelowna, the projected 10-per-cent gain translates to an average selling price of $284,500.
In Victoria, where there is expected to be some easing of price pressures, the estimated five-per-cent increase should still see average prices reach up to $395,000, the company said.
Arlene Butler, general manager of Re/Max Select Properties in Vancouver, who surveyed Greater Vancouver agents for the report, said job growth, strong spending on infrastructure for projects such as the 2010 Winter Olympics, port expansion and continued low interest rates, have helped fuel demand.
Butler added that for the first time, Re/Max offices across the Greater Vancouver region reported a lack of listings “across the board.”
“People ask, ‘Why are people paying these prices? Where is it coming from,’ ” she said. “I think its a fact that demand will remain strong, supply will remain scarce, and that pushes prices up.”
Butler added that Re/Max expects sales across the Lower Mainland to remain stable at 41,000 transactions in 2006 — the same number expected this year. However, that will be due to lack of supply.
Tsur Somerville, director of the centre for urban economics and real estate at UBC’s Sauder School of Business, said the fundamentals behind Greater Vancouver’s price increases leave room for further gains.
However, he added that the market conditions do not preclude a flattening or downturn in sales, but it would take a significant, unforeseen negative event, such as a flu pandemic or a significant downturn in the U.S. economy to do it.
Interest rates, which could edge up through 2006 as the Bank of Canada is expected to increase its key overnight rate to four per cent, could help stall price increases, though not necessarily put a dent in the market.
“It doesn’t mean you can’t buy a house. It means [the rate increase] is going to shut off your ability to have price increases,” Somerville said.
Wayne Schrader, owner of Re/Max Camosun realty in Victoria said limited supply has been a key factor in pushing up prices in that city. “There’s only so much product here; it’s very beautiful,” Schrader said. “There’s only so much waterfront; it’s very expensive. It’s a limited supply that drives the price up.”
Schrader added that Victoria‘s real estate prices have gone up about 50 per cent in the last five years.
