But agency predicts average Greater Vancouver price will rise nine per cent
Derrick Penner
Sun
Canada Mortgage and Housing Corp. is forecasting that average 2006 home prices will climb nine per cent to $463,000 in Greater Vancouver and 7.6 per cent to $355,000 across British Columbia, making price a key factor in a predicted cooling of the province’s housing market.
Carol Frketich, CMHC’s regional economist for B.C., said buyers will see their carrying costs rise in 2006 as prices continue to escalate and mortgage interest rates increase, which will in turn hold down some of B.C.’s housing demand.
Frketich predicts B.C. will build 32,600 new housing units in 2006, which is six per cent below the 34,667 new homes built in 2005. She also estimates that the province’s resale market will see 97,000 Multiple-Listing-Service sales, which is 8.7 per cent below last year’s record 106,000.
In 2007, Frketich predicts that new housing starts will slip another four per cent to 31,300.
“One of the factors that is going to slow the market down, is the level of prices,” Frketich said. “But we’re still looking at an active market with high levels of new-home construction and resale activity as well.”
CMHC analyst Cameron Muir said it appears that Greater Vancouver is “closer to the end of the current cycle than [it is] to the beginning of the current cycle.”
In 2005, CMHC counted some 34,667 new-home starts, which was six-per-cent higher than Frketich’s initial prediction for the year, but she noted that mortgage interest rates averaged lower than she anticipated.
Frketich noted that B.C. added more jobs to the economy in 2005 than she predicted, so she revised her earlier 2006 housing-starts forecast up from about 31,700.
CMHC forecasts that employment in B.C. will increase by 2.5 per cent over the next two years, which will draw people from other provinces and help support demand.
Across Greater Vancouver, Muir said housing starts will slip 1.8 per cent to 18,500 in 2006 and MLS sales will decline 7.6 per cent to 39,000.
Muir said much of the drop in housing starts will be “to do with both the availability of land as well as a limited supply of skilled trades.”
Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said an easing of construction activity won’t be unexpected and characterized it as “almost a self-imposed slowdown.”
Simpson said builders are becoming cautious about taking on too many projects at once in order to ration the available skilled tradespeople capable of the work.
Simpson added that builders are also enduring a great deal of uncertainty over how much construction costs will increase. Last week, Anthem Properties cancelled an upscale, 161-unit condominium-live-work project in Victoria over inflated costs and questions about the availability of skilled workers.
On Monday, the Independent Contractors and Businesses Association of B.C. said builders can expect construction costs to rise by 11 per cent this year and by as much as 55 per cent by the end of the decade.
Simpson added that he does not expect dramatic changes in the market because mortgage rates, although climbing, are rising slowly.
“There’s nothing overly aggressive [in the CMHC forecast],” Simpson added. “And there’s no gloom and doom in it.”
Muir said he predicts that average house prices in Vancouver to increase another four per cent in 2007 to hit $483,000. He also forecasts that new-home starts will decline 1.6 per cent to 18,200.
“Really what we’re seeing out there is that by the time we get to 2007, affordability in Vancouver is going to reach the point that it impinges on sales as well as price gains in the marketplace,” Muir said.
© The Vancouver Sun 2006
