Vancouver‘s housing sales remain on target to set a record in 2004, but monthly figures from September indicate the heated market from the past year and a half is cooling.

For the third straight month, sales dropped in comparison to the same period a year earlier. In September, sales of detached homes fell dramatically, by 26.8 per cent compared to September of 2003, according to figures released Wednesday by the Real Estate Board of Greater Vancouver.

While apartment sales were up by 6.5 per cent, the sales of all housing for September in the Greater Vancouver area fell by 15 per cent compared to the same month last year.

July was the first indicator month that the real estate market was slowing. That month, sales fell 25 per cent compared to the same month a year ago.

In August, the sales dropped by 22.8 per cent compared to August of 2003.

But despite the recent slippage, board president Andrew Peck said that at the current rate of sales, 2004 will be a record for the real estate market because of the strong figures from the early half of the year.

“We saw a considerable drop off. Does this mean it’s the end of our good market?” Peck said Wednesday. “The strong economic factors are still there. We couldn’t continue to break records.”

In the Greater Vancouver real estate market — which excludes Surrey, but includes Whistler — the total number of sales for September was 1,128. In August, the total was 1,061. In September of 2003, 1,540 properties were sold.

Prices, however, continue to rise. The benchmark price — the board’s unit to define a typical house — increased to $504.650, up 14.8 per cent from a year ago.

There is continued strength in the resale market because of three factors — low interest rates, strong job growth, and high level of consumer confidence — said Carol Frketich, regional economist for the B.C. and Yukon region of the Canada Mortgage and Housing Corporation.

“We’re still seeing strong demand and supply increasing,” she said. “It’s a symptom of a healthy market. The level of resell is still very high, everything remains quite healthy even though it’s slowing. It reflects in part the rising interest rates.”

On Wednesday, the posted five-year mortgage rate was 6.3 per cent. In September of 2003, the rate was also at 6.3 per cent, but during the 12 months in between the rates has dropped as low as 5.7 per cent.

Senior mortgage broker Ajay Soni, with Invis Financial Group, said the market in the past year moved at a pace 25- to 30-per-cent faster than a normal real estate market.

“The market has a way of reinforcing prices. No one is going to sell if they’re not going to get the price they want. I have a direct example. I was trying to sell a property 15 months ago when things were very hot and it took nine months to sell it,” Soni said.

Soni, who has been in the business for 17 years and remembers the boom and bust of the 1990s, said he anticipates prices will begin dropping in the new year.

“During the early to late ’90s, there was a slow erosion of prices, about a two-per-cent reduction,” Soni said. “Realtors will always tell you, it’s in their nature, like brokers, to always stay positive, that it’s always a good time to buy.”

But as a specialist who deals in private financing, Soni said he has to be realistic in looking at the pricing of properties and whether the true value is reflected in prices.

Anson Realty realtor Grace Kwok said prices will not fall, but remain stable.

“It’s a very happy, balanced market,” she said Wednesday. “There was tight supply and pent up demand and now everybody is a bit calmer. The supply and demand are better able to match each other.”

Across Canada, the housing market is also showing signs of cooling following three years of record price increases and sales.

Tsur Somerville, the director of the UBC Centre for Urban Economics and Real Estate at the Sauder School of Business, said buyers hoping for a market crash will be disappointed.

“It will never be inexpensive to buy in Greater Vancouver,” he said. “We will always expect Vancouver to have the most expensive housing market in Canada.”

Somerville said the downtown condominium market is the weak point in the market. Investors purchased into units expecting their mortgage payments would be covered by rent.

“There has to be rent to support their investments and it’s all linked. With rental vacancies rising, it’s harder to achieve.”

When renters can’t cover mortgages that may lead to a big sell-off of downtown condo properties or the other alternative may be that prices are attractive enough that buying downtown is more appealing than buying a house in New Westminster.

“All housing markets are linked in some way,” Somerville said. “No one can predict what’s going to happen.”

The drop in sales for three consecutive months is an indicator that the housing market may have peaked, Somerville said. “But it’s like a recession. You don’t announce a recession is happening. You know it’s happened afterwards. Like the housing market, there are too many things that can cause numbers to bounce around,” he said.

HOME SALES DECLINE:

Vancouver‘s total real estate sales fell for the third month in September. Here’s how it compares to September 2003:

15%

Total sales

26.8%

Detached homes

30.6%

Attached homes

6.5%

Apartments

© The Vancouver Sun 2004