A bounce-back, but no boom
Derrick Penner
Sun
British Columbia‘s real estate market should be seen as bouncing back but not booming, according to the B.C. Real Estate Association’s latest forecast.
While association chief economist Cameron Muir expects sales across B.C. to rise 20 per cent over 2008 levels to 82,900 units by the end of the year, that is still far below the boom years of 2002 to 2007.
And the picture is heavily influenced by near-record low mortgage rates that have stimulated sales during the recession, and by relatively higher levels of sales in the Lower Mainland.
B.C. home prices are “flirting with record highs” in some markets, which Muir said will once again squeeze buyers out of the market and help moderate sales over the next year.
Muir estimates the average home price in B.C. will rise two per cent over 2008 to a new record of $463,200 by the end of 2009. The average price in 2010 is expected to rise to $482,800.
“The expectation this time coming out of recession [is that] first, economic recovery is going to be a slow and gradual affair,” Muir said in an interview.
He said housing demand is going to be more in line with population growth rather than repeat the “kinds of increases” seen during 2002-07.
Muir’s assessment for the B.C. Real Estate Association is the latest forecast predicting a continuation of the province’s real-estate resurgence, albeit at below-peak levels.
He noted the 82,900 sales he expects to occur across B.C. this year will be close to B.C.’s 10-year average for annual sales, while next year’s forecast of 89,600 sales will only rise eight per cent from 2009.
That activity, however, isn’t being shared equally across the province. Muir said Metro Vancouver will account for 41 per cent of all sales in B.C., a proportion that is larger than usual for B.C.’s largest market.
Meanwhile, sales in the Kamloops region, South Okanagan, Kootenays and Northern B.C. are expected to be down from 2008.
Muir forecasts some of those regions, such as Kamloops, Kelowna and the South Okanagan, will experience stronger sales growth than Lower Mainland markets in 2010 as their economies improve.
However, some economists worry the current low interest is skewing the market’s picture.
“At this point, we are stealing activity from the future by accelerating buying activity,” Benjamin Tal, an economist with CIBC World Markets, said. “This means that activity in mid- to late-2010 and 2011 will not be as strong.”
Muir acknowledged that some of the sales occurring this year are the result of “pent-up demand” from buyers who sat out of the market last fall, but have been lured back in by low mortgage rates.
He added much of that demand has dried up and sales should level off in 2010.
Tal warned the story of Canadian real estate has been about affordability. Low mortgage rates have resulted in borrowers taking on larger mortgages, but Tal said those rates will rise at some point. “For many borrowers we might see a de facto doubling of their mortgage payments,” Tal said.
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