Weaker demand puts pressure on house prices
PAUL LUKE
Province
The market was red-hot when Crest Realty agent Terry Flahiff closed the sale on this home on Vancouver’s West 10th Avenue in March. Now it’s the chilliest since the turn of the decade. Photograph by : Les Bazso, Province Files
Home sales in B.C. have slowed to a pace unseen since the decade started, the B.C. Real Estate Association says
Residential sales volume on the Multiple Listing Service in B.C. fell 38 per cent to $2.9 billion in July from the same month a year earlier, the association said.
Residential unit sales tumbled 37 per cent to 6,541 units over the same period. The average MLS residential price in B.C. eased 0.5 per cent to $444,358 from July, 2007.
“B.C. households are now cautious about making major purchases in light of uncertainty around fuel prices and other inflationary pressures,” association chief economist Cameron Muir said.
Weaker demand has put downward pressure on prices in some markets by swelling the inventory of homes for sale, Muir said.
Last month, 60,008 homes were for sale in B.C., up 63 per cent from the previous year, the association said.
“While this inventory is expected to decline in the coming months, most B.C. regions will remain in buyers’ market territory for the remainder of 2008,” Muir said.
On a year-to-date basis, the average residential price across B.C. rose 8.2 per cent to $469,676 from the same period a year earlier.
Year-to-date sales fell 24 per cent to 49,448 units.
Nationally, home prices will continue to outpace inflation this year and next the federal housing agency forecast Friday.
The relatively upbeat forecast also projected that the pace of housing construction would slow but to what are still historically high levels.
“Strong economic fundamentals, such as continuing high employment levels, rising incomes and low mortgage rates will provide a solid foundation for healthy housing markets this year,” CMHC chief economist Bob Dugan said.
However, rising mortgage rates will dampen housing construction by 5.6 per cent this year to 215,475 units from 228,343 in 2007, with seven provinces seeing a slowdown, it said. Next year, rising competition from the existing home market, coupled with the elimination of the pent-up demand that built up during the 1990s, will result in a further drop in starts to 194,000.
The only provinces that will see an increase in the pace of construction this year are Newfoundland and Labrador, Manitoba and Saskatchewan, with Manitoba the only province projected to post a further gain next year.
It also forecast that existing home sales would fall nearly 12 per cent this year and then by nearly 2.6 per cent next year.
Despite the slowdown in sales, it predicts the average selling price of a home will still rise by 3.3 per cent this year to $317,450, and by a further 3.0 per cent in 2009 to $327,000.
The forecast is a lot more optimistic than a recent national construction industry forecast that housing prices won’t rise more than inflation this year and could fall as much as five per cent in inflation-adjusted terms.
© The Vancouver Province 2008
