Improving economic conditions should counterbalance erosion in affordability
Brian Morton
Sun
Residential sales across the province are expected to ease by three per cent this year to 82,350 units before increasing four per cent in 2011 to 85,900 units, according to the B.C. Real Estate Association.
Waning demand, upward pressure on mortgage rates and tighter lending restrictions will moderate consumer demand this year, particularly in the Metro Vancouver, Victoria and the Fraser Valley areas, the association said in its second quarter housing forecast released Monday.
Improving economic conditions, however, are expected to counter-balance some of the erosion and stronger economic and employment growth next year will push home sales higher.
“The housing market will exhibit much more stability over the next 18 months,” BCREA chief economist Cameron Muir said in an interview. “The erosion of affordability will be somewhat offset by improving economic conditions.
“This is largely due to pent-up demand during the recession being expended as well as higher pricing and tighter lending. That’s had an added impact on affordability.”
Muir said that while B.C. home sales are expected to be near their 10-year average of 85,569 units this year and 2011, sales in Vancouver are expected to be down 7.9 per cent from 2009.
After climbing 2.4 per cent in 2009, the average residential price in the province is forecast to increase another 6.2 per cent this year to $494,600 before rising one per cent to $499,700 in 2011. Vancouver, Victoria and the Fraser Valley comprise two-thirds of provincial home sales and the 2009 year-over-year change in B.C. home prices largely reflects gains already realized in those markets, he said. “In 2009, housing sales rebounded a dramatic 44.2 per cent in Vancouver, much higher than elsewhere [in B.C.] This year, [sales] in Vancouver, Victoria and the Fraser Valley will edge lower while other markets [in B.C.] will increase moderately.”
For Metro Vancouver, sales are forecast to drop 7.9 per cent this year and rise 4.5 per cent in 2011 to 34,900 units. Prices are expected to increase 10.7 per cent this year in Greater Vancouver to $655,900 and 0.4 per cent in 2011 to $658,800.
“Strong consumer demand in Vancouver, Victoria and the Fraser Valley was largely responsible for driving the average home price in the province higher over the last three quarters,” added Muir. “However, demand has moderated in those markets and a larger inventory of homes for sale has pulled market conditions into balanced territory, providing less upward pressure on home prices.”
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