A report says high prices will continue to push buyers out
Derrick Penner
Sun
High real estate prices will continue to push people out of the market through this year and next, although a still-expanding provincial economy will keep market values high, according to a new report released Thursday.
The number of real estate sales recorded through the Multiple Listings Service will drop three per cent this year and a further four per cent in 2008, according to the first semi-annual housing forecast from the B.C. Real Estate Association.
The forecast also estimates that housing starts will decline — by seven per cent this year and 5.5 per cent in 2008 — as physical limits on the ability of contractors to build new homes and the so-called “affordability squeeze” add to construction pressures.
Prices, however, will edge upward — by eight per cent this year and seven per cent in 2008 — as growth in the job market continues and shortages of skilled workers push wages up faster than inflation.
“[The forecast] really points to what has been going on in the housing market for the last seven or eight months,” Cameron Muir, B.C. Real Estate Association chief economist, said in an interview.
The number of sales have retreated from record highs, as surveys that track the sentiments of first-time buyers have found that more of them are sitting on the sidelines.
“One of the reasons we see sales waning is that some first-time, or low-equity buyers are finding that home prices are such that they simply can’t get into home ownership, or are choosing not to,” Muir added.
However, Muir added that his forecast for 93,600 real estate sales across the province this year is still well above the 10-year average of 77,800 transactions per year. While that is lower than 2006, it “is not a signal that sales are falling through the floor.”
Tsur Somerville, director of the centre for urban land economics and real estate at the Sauder School of Business at the University of B.C., said it is consistent for prices to keep climbing while sales are falling “if sales are declining from a very high point, and there are still indicators of a strong market.”
Carol Frketich, Canada Mortgage and Housing Corp.’s regional economist for B.C., said recent economic data, such as Statistic Canada’s labour market survey and measures of economic output and disposable income, are stronger than she anticipated in her own forecast.
“Those things are still, I think, a fairly solid footing for the housing sector,” Frketich said.
Frketich’s own revised forecast, which she will release in mid-May, holds to expectations that housing markets will moderate.
Muir expects stronger performances from some areas than others, such as Northern B.C. where he expects prices to climb 14 per cent to an average $189,000 this year.
Kamloops has also seen strong sales, and is expected to experience price growth of 15 per cent this year with the average reaching $255,000, although recent census data shows its population growing more slowly than the provincial average.
Muir noted Kamloops benefits from strong retirement and recreational property markets. So does Chilliwack, he added, where buyers can find property bargains relative to towns closer to Vancouver.
Chilliwack is expected to see 13-per-cent growth in its house prices this year, with a $305,000 average according to Muir’s forecast.
The forecast for Greater Vancouver, however, is expected to see price increases of seven per cent with the average to hit $545,000 this year.
The forecast noted that in 2006, Vancouver homebuyers “began to show some resistance to rapidly escalating home prices,” for the first time in four years.
In the Fraser Valley, Muir forecasts that prices will rise nine per cent this year hitting $428,000.
© The Vancouver Sun 2007
