Condos keeping red-hot real estate market stoked

Wednesday, January 31st, 2018

CMHC housing outlook classifies Metro Vancouver as vulnerable to volatility

Derrick Penner
The Province

Metro Vancouver’s real estate market remains classified as highly vulnerable to volatility at the start of 2018 due to an overheating in condo sales in some corners and overvaluation of prices that continue to defy local fundamentals, the Canada Mortgage and Housing Corp. said Tuesday.

That was the conclusion of CMHC’s first-quarter housing market analysis that found conditions in Metro Vancouver have remained in a precarious position for the last six quarters.

“What we have in Vancouver as a region is a two-speed housing market,” said Eric Bond, CMHC’s regional market analyst. “The single-detached (home) is at one speed with more balanced market conditions and not as much price growth.”

“Now, really, it is attached properties, particularly condo markets, where we still have multiple offers, there is still strong price growth and limited (inventories) for sale.”

And that segment, Bond said, is being driven by first-time buyers scrambling to purchase units where prices are still within reach of their means.

For North Delta, buyers saw condo prices soar 53 per cent in the fourth-quarter compared with a year ago. In Surrey and Langley it was 34 per cent.

More broadly, the scramble for more affordable housing saw prices in the Fraser Valley shoot up 15 per cent by the end of 2017, compared with the same period a year ago. By contrast,  prices across the bulk of Metro Vancouver covered by the Real Estate Board of Greater Vancouver rose 10 per cent.

CMHC’s forecast does anticipate new mortgage rules that make it tougher for first-time buyers to qualify for loans will curb some demand in the market.

Bond said their forecast is for between 32,000 and 34,000 property sales in Metro Vancouver in 2018, compared with 37,000 in 2017, but a lack of inventory of homes for sale will continue to put pressure on prices in some segments.

The region saw record-setting new-home construction in 2016, the CMHC’s analysis shows, but builders still haven’t been able to keep up with demand keeping the number of new units available for sale low.

“Supply in the region has been fairly unresponsive to strong demand,” said CMHC chief economist Bob Duggan. “That’s what we’ve seen in Toronto and Vancouver.”

CMHC’s analysis also continued to track an issue with properties being over valued, prices that can’t be accounted for by local fundamentals such as income and population growth.

On that point, Bond said the data CMHC has to work with “is a bit thin” to determine where the wealth to make purchases is coming from, but the agency is starting to build a better picture.

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