Record Home Prices on the Way?

Expert says Victoria and Vancouver will Outperform the Market


Prices are on the rise, you don't have to be a Realtor to know that... but why?  I am getting asked this question everyday... Here's a few of the reasons why I believe prices are rising... and why I feel that they will continue to rise or, at the least, be maintained over the next year...

1) We have a very depleted supply of affordable inventory (entry level properties)
2) The market is plentiful with buyers and the demand for properties is huge
3) Interest rates are low... so low in fact, that mortgages are often equal to, or less than, what people are paying in rent
4) Vancouver is a hidden gem internationally, a gem that has just been uncovered and exposed to the world.  Vancouver may be the most expensive place to live Canada, but compared to similar cities around the world it is very affordable.
5) Because of the recession and the halt of new developments due to financing and bankruptcies over the past 18 monthes there is much less new developments and properties coming on the market than originally planned.
6) More and more people are migrating to Vancouver... whether they are moving here from Alberta, Saskatchewan or somewhere around the world... they are flocking here to enjoy the unbeatable LIFESTYLE that Vancouver has to offer.  As our population grows.. so does the need for housing.

I read this article yesterday in the Times Colonist by Carla Wilson... I agree with it... read on...

Canadian home prices will reach a record high this year, but those expecting the degree of home-price inflation seen in the past decade will be disappointed, a Scotiabank real estate expert said yesterday.

"It's time to reset price expectations for the Canadian housing market," Adrienne Warren, senior economist with Scotiabank, said at a conference in Toronto. "This was an exceptional decade for pricing."

However, urban areas such as Victoria, which attracts retirees, and Vancouver, a destination for immigration, will "probably be outperforming markets over the next few decades, just based on those demographic trends," Warren said.

Victoria and Vancouver are among the tighter housing markets in Canada and "there is a still of shortage of listings relative to buyers," said Warren.

Most major centres are in a sellers' market, she said. Continued demand is expected this spring as buyers rush to beat tighter qualifying rules for insured mortgages coming in April.

Also, B.C. and Ontario are bringing in harmonized sales taxes in July. In B.C., a tax credit rebate will apply to new homes priced below $525,000.

Over the past 50 years across Canada, prices on average rose between two per cent and 2.5 per cent annually in each decade. But prices rose an average of 5.2 per cent each year between 2000 and 2009, leading to the current elevated pricing conditions, Warren said.

"Some of that reflects a very strong global economy, a commodity boom, unemployment rates falling, all very positive for housing," she said.

Some lean years in the 1990s meant there was an element of "catching up" going on in the last decade, Warren said. Average price increases between 1990 and 2009 were slightly less than two per cent.

This year, Warren still anticipates a strong spring sales market as consumers take advantage of low interest rates before an expected rate hike by the Bank of Canada in July. Milder winter temperatures across the country may "also have put a bit of spring into the typically slow winter sales season."

Overall, Warren forecasts 10 per cent growth in sales volumes to 510,000 transactions for 2010, just shy of record levels in 2007.

Average prices nationally will increase about eight per cent to a record $345,000, and housing starts will rise to 190,000 units, she said.

A total of 621 properties sold through the Victoria Real Estate Board's Multiple Listing Service in February.

The average price of a single-family home was $620,833 and the median was $560,950.

This will be a "transition year," for Canada's housing market, Warren said. Halfway through 2010, it will likely start to slow down, a trend that will carry through to 2011 and beyond, she said.

Cameron Muir, chief economist for the B.C. Real Estate Association, said low mortgage rates and pent-up demand has led to the dramatic rebound in housing demand nationally and in areas such as Victoria and Vancouver Island. He also expects sales to modify.

Blogged By Kelsie Struch, Vancouver Realtor 778.387.6090

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