This year, for the first time in many years, a number of homeowners in some areas of B.C. will see a drop in their property assessment, B.C. Assessment said Wednesday.

The most significant decreases will be seen in Whistler, Pemberton, on the Sunshine Coast and on Bowen Island, said Jason Grant, B.C. Assessment Authority assessor for the Vancouver Sea to Sky region.

“In stark contrast to last year, where (more than) 25-per-cent increases weren’t unusual, most residential homeowners (in Vancouver Sea to Sky) will open their assessment this year and say, ‘I’m within about five per cent … of where I was last year,’” said Grant McDonald, deputy assessor for B.C. Assessment’s Vancouver Sea to Sky region.

“Looking at the city of Vancouver, if you drew a graph for a 10-year period from 2002 to 2012, it pretty much is a very steep curve in terms of value increases, with a blip in 2008 when values appeared to be falling a bit. Now it has sort of flattened off; the market is taking a bit of a breather.”

Last year, homeowners in some areas of Vancouver, West Vancouver, Richmond and Burnaby saw their assessments rise as much as 30 per cent, while some areas, such as Squamish, Whistler and Pemberton saw decreases of 10 to 15 per cent.

“Some of the markets that saw some pretty good run ups in prices in 2011, saw a kind of floating back to earth in 2012,” said Cameron Muir, B.C. Real Estate Association chief economist. “For example, we’ve seen the single-family, detached-home market on the west side of Vancouver show more softness after a relatively strong 2011.”

Property assessments for a given year reflect market value as of July 1 the previous year. B.C. Assessment does not provide averages, but it did provide some specific “representative examples” of properties and how much their values changed this year.

A 50-foot, single family lot on Vancouver’s west side that was assessed at $1,645,400 in 2012 is assessed at $1,622,900 for 2013, a drop of 1.3 per cent. A single-family home on a 33-foot lot on the west side of Vancouver is assessed at $1,256,200, a drop of 5.8 per cent compared to a 2012 assessment of $1,329,600.

On the city’s east side, a 33-foot single-family lot assessed at $1,031,300 last year is assessed at $1,081,700 this year, an increase of 4.9 per cent.

In Whistler, a single-family dwelling in Alpine Meadows that was assessed at $2,252,000 last year is assessed at $2,145,000 this year, a drop of 4.8 per cent. In Whistler Village, a two-bedroom apartment that was assessed at $491,000 last year is assessed at $429,000 this year, a drop of 12.6 per cent.

On Bowen Island, a non-waterfront single-family home that was assessed at $530,000 last year was assessed at $454,000 this year, a drop of 14.3 per cent. A waterfront home there dropped to $1.3 million from $1.7 million, a drop of 23.5 per cent.

Muir said both of those areas are dependent on recreational buyers, and that the strong Canadian dollar and concerns about the U.S. and global economy are affecting that market.

“When we look at recreation properties, as well as luxury properties, (they) tend to be much more volatile in pricing,” Muir said. “When times are very good, prices tend to climb much more rapidly than your typical home. At the same time when we see some weakness, they’re likely to decline more rapidly as well.”

In other areas of Metro Vancouver, some properties saw increases up to 10 per cent, while some areas saw drops of up to five per cent from last year.

For example, a single-family house in the Thompson area of Richmond that saw a 30-per-cent increase last year to $1,677,000, is this year assessed at $1,642,000, a drop of two per cent.

Two years ago, Richmond saw some properties increase as much as 17 per cent, while many West Vancouver and Vancouver homeowners saw jumps in assessment of 12 or 13 per cent. Whistler prices were down two per cent at that time.

B.C. Assessment does provide percentage changes in the total value of properties in a region, but this amount is not an average change that homeowners will see on their assessments because it includes new construction and other non-market factors such as renovations and rezonings. Nonetheless, it is an indication of the general direction property assessments are moving in a given area.

For 2013, the total property roll for Vancouver increased 2.08 per cent, in Delta it rose 3.55 per cent, in Surrey it rose 5.15 per cent and in West Vancouver it rose 8.8 per cent. The total property roll in Whistler fell 3.81 per cent, on Bowen Island it fell 6.9 per cent and in Pemberton it fell 4.31 per cent.

Across the province, the total number of properties on the 2013 roll is 1,935,426, a 0.92-per-cent increase from 2012. The total value of real estate on the 2013 roll is $1,129,026,081,413, a 2.3-per-cent increase from 2012, B.C. Assessment said.

A drop in a property’s value does not necessarily translate into a drop in property taxes, which would only differ from a city’s budgeted increase if a particular property has gone up or down in value more than the average for other properties in the same community.

Property assessments for 2013 reflect market value as of July 1, 2012. Since that time, sales in Metro Vancouver have slowed and some prices have dropped.

“In markets that have declined in value since the summer of 2012, the 2013 property assessment may be higher than current sales or listing prices,” said Zina Weston, deputy assessor.

“We’ve seen quite a decline in the number of sales; so far for 2012 it’s down about 30 per cent, but the actual values haven’t really come off. In Vancouver, things are still selling for higher than we had on the assessment roll last year,” McDonald said.

People who feel that their property assessment does not reflect the home’s property value as of July 1, 2012, should contact the B.C. Assessment office for their area. Appeals will be accepted until January 31.

“It is a quieter year and I suspect that will be reflected in the number of inquiries we get,” McDonald said. “It will be interesting to watch the next few months to see what happens.”

One assessed value that is contentious is that of the Horseshoe Bay ferry terminal; a recent decision by the Property Assessment Appeal Board slashed its value to just $20 from $47.7 million, meaning the District of West Vancouver will lose about $250,000 in property tax revenue. The District of West Vancouver plans to fight the assessment, which could have ramifications for other ferry terminals, in court.

The province increased the threshold for the Home Owners Grant for property taxes by $10,000 to $1.295 million to keep pace with rising property value assessments, Finance Minister Michael de Jong announced Wednesday.

Assessments will be arriving in the mail in the next few days and are available online at http://evaluebc.bcassessment.ca.

Source: Tracy Sherlock, Vancouver Sun

The slowdown in Vancouver’s real estate market is one factor leading the Canadian Real Estate Association to cut its sales forecast for this year and next on Monday.

Vancouver’s sales numbers dropped 27.6 per cent — the second biggest drop in the country behind Halifax — in November 2012, compared to the same month last year, after tighter lending rules that came into force this summer. The average price is down 6.3 per cent for the same period to $682,215, while the MLS home price index is down 1.7 per cent from a year ago. The average price reflects the mix of sales, while the HPI reflects price changes for typical homes.

While BMO deputy chief economist Doug Porter said most cities across Canada would see a soft landing for their real estate markets, he called Vancouver a “rather obvious exception.”

“I don’t know that I’d call it a hard landing in Vancouver, but it’s definitely a bumpier landing than most cities in Canada are going through right now,” Porter said.

Meanwhile, it appears people thinking of selling their homes may be holding off, especially in Metro Vancouver, as the region saw the largest drop in the country for new listings.

New supply reached its lowest level in more than two years, CREA said.

“That may help avert a harder landing for prices because sellers do have the leeway to back off,” Porter said. “Fundamentally, I think that’s one of the reasons why the Canadian housing market is likely not going to have a hard landing because you’re not going to have a lot of motivated sellers — people aren’t going to be forced into it by rising interest rates or declining employment so they can take their time and wait for the market to stabilize.”

Source: Tracy Sherlock and Craig Wong, Vancouver Sun

The total value of homes sold in B.C. dropped by nearly one-quarter in November, with declines in Vancouver and the Fraser Valley leading the slide.

The dollar volume of homes sold through the Multiple Listing Service in B.C. declined 24.6 per cent to $2.3 billion in November compared to the same month last year, the B.C. Real Estate Association reported Thursday.

Cameron Muir, BCREA’s chief economist, said that tighter mortgage rules introduced this summer had squeezed some buyers out of the market, but he expects sales to go up in 2013.

“When I suggest that we’re going to see an increase in sales levels next year, it doesn’t mean we’re going to return to the heady days before the recession. But the longer we see sales levels fall below the long-term average, the more likely we’re going to see pent-up demand (grow) in the marketplace, which may contribute to increased sales activity in 2013,” Muir said.

The number of units sold this November was down 17 per cent in the province from November 2011 to 4,680, while the average price was down 9.1 per cent to $480,891.

In 2011, there were large numbers of single family luxury homes sold, which elevated the average, Muir said. This year, a more typical mix of homes is being sold, so the average is lower. But prices are also coming down.

“There has been some modest downward pressure on prices in Vancouver, particularly in the single detached market on the west side, for example,” Muir said. “For the first six months of this year, the west side of Vancouver is down 9.7 per cent on the home price index. West Vancouver is down nine per cent and Richmond is down 6.2 per cent.

“We’ve seen those markets floating a little bit back down to Earth, and they’re having an impact on the aggregate numbers for the region.”

In Metro Vancouver, the dollar volume of sales fell 32 per cent from $1.74 billion to $1.18 billion, while in the Fraser Valley total sales fell 25 per cent from $498 million to $371 million.

“More promising numbers are coming from … the area around Kelowna — they’re up 13 per cent in unit sales,” Muir said. “And B.C. Northern has been incredibly stable in this post-recession period. That’s likely the result of much more diversification of the economy in Prince George, for example, and relatively buoyant demand for commodities. Unemployment did not skyrocket there in the recession — it’s very resilient in B.C. Northern this time around.”

While sales in the Okanagan are up for the year so far, Muir said that region has not seen the same rebound Vancouver prices did from the recession.

“Prices in that region have come off in the past three years, but not as much as people might have expected them to, given that inventory levels have been extremely high relative to sales for about three years now,” Muir said.

For the year to date, across B.C. sales dollar volume was down 18.7 per cent, while the number of units sold was down 11 per cent, and the average price dropped 8.6 per cent to $515, 611.

Source: Tracy Sherlock, Vancouver Sun

The number of sales may be down in multi-family developments, but buyers are still keen on new homes in highrises near transit lines, Colliers International’s most recent residential real estate report for Metro Vancouver found.

Three developments in particular — Station Square and Solo District, both in Burnaby, and MC2 in Vancouver — were bright spots in the report, which said that overall multi-family sales were down 15 per cent in the third quarter of 2012, to 1,899.

“This is the second consecutive quarter in which sales volumes have decreased. However, despite all the crash talk, the sales volume posted this quarter and year to date is evidence of sustained demand for new multi-family homes in the Metropolitan Vancouver market,” said Scott Brown, senior vice-president, Colliers Residential group.

He said demand in the resale market is softer than demand for presales because presales tend to attract investors, particularly if they are near transit and will be attractive to renters.

“The ones that are selling the fastest are on transit and appealing to investors,” Brown said. “The buyers are a little bit more concerned about the immediate, short-term future, but there still is demand there and their belief in the long-term fundamentals of the Vancouver market is why they’re investing in these properties.”

Station Square is a five-tower development in Burnaby near Metrotown that will be ready for occupation in 2015. Units were priced from $280,000 for a studio apartment up to $1.35 million for a penthouse suite.

The first building of 269 units is mostly sold out, after about three months of a soft opening and a public opening Oct. 20, said Greg Zayadi, director of sales and marketing for Anthem Properties, which is a partner of the Beedie Group on Station Square.

“The location is key,” Zayadi said, adding that buyers want to be close to SkyTrain and Metrotown. He said most of the buyers are what he calls “family investors”: people who are buying with the plan that someone in their family will eventually live in the suite. He said 40 per cent of buyers at Station Square already have an address in Burnaby, while 30 to 35 per cent have an address in Vancouver.

Although they have addresses in the Lower Mainland, those might be homes of relatives, Zayadi said.

“Approximately 70 per cent of highrise sales occurred at developments targeting the Chinese buyer. While it is evident that the Chinese buyer is not as active as in recent years, this purchaser group does continue to be the primary buyer in Vancouver and Burnaby,” the Colliers report states.

Realtor Sunny Lee, who sold seven units in Station Square, said most of the people he sold to were investors, and that some were buying for their children. He said he believes Station Square sold so well because it is very close to SkyTrain, but not so close that the noise is a factor.

He said this year he has sold more pre-sale new homes than re-sale homes, which is unusual for him.

“Buyers are concerned about the current market, but they still believe in the future,” Lee said, adding that people are looking for a good investment in this low-interest rate environment. “They want to put their money somewhere.”

He said buyers of pre-sales usually put between five and 10 per cent down when they sign the contract, then another five to 10 per cent about six months later, with the remainder due when they move in.

The Colliers report also mentioned Appia’s Solo District development in Brentwood as selling well.

Looking ahead, in the fourth quarter of 2012 two projects are expected to keep sales flowing: Mosaic’s Elizabeth, near Queen Elizabeth Park, and Intracorp’s MC2.

MC2 is a two-tower development on Marine Drive and Cambie Street in Vancouver, directly across the street from the Canada Line. There are 443 homes in 26-storey and 32-storey towers, with prices for one-bedroom suites starting at $259,000 and two-bedroom suites at $421,500. The project opened for sale Oct. 27 and since then has sold 347 homes, said Linda Chu, director of marketing for Rennie Marketing Systems, which is selling the project.

Brown said people downsizing from single-family homes are also driving multi-family sales. He said developers are starting to build larger multi-family units — bigger than 1,000 square feet — to appeal specifically to downsizers rather than investors.

The Colliers report calls for annual sales volumes of 10,500 multi-family units in 2012, with a similar amount projected for 2013.

Canada Mortgage and Housing Corp. says housing starts in Metro Vancouver are forecast to remain flat in 2013.

Although the 2012 sales numbers of multi-family units are down more than 10 per cent from 2011, 2012 stands to be the second-best year for multi-family sales since 2007, the Colliers report said.

“2011 was an outstanding year. 2012 is a very good year,” Brown said. “We think 2013 will be about the same.”

Source: Tracy Sherlock, Vancouver Sun

The article below by Scott Simpson appeared in yesterday’s Vancouver Sun regarding the reasons behind Metro Vancouver’s home sales drop.

Personally, I don’t agree with Andrey Pavlov, a professor of finance at SFU, who is quoted as saying that real estate prices in Metro Vancouver are comparable to New York City. According to StreetEasy, current median prices for condos in downtown New York, ie. Manhattan, are US $639,500 (Cdn $624,000) for studios, US $885,000 (Cdn $864,000) for 1 beds, and US 1.75-million (Cdn 1.708-million) for 2 beds.

That’s way more than the cost of similar sized apartments in Vancouver.

Every time there’s an increase or decrease in listings, sales, or prices, it makes news. Real estate has always been a cyclical game. Prices will never keep on increasing, there will be corrections along the way, but in Vancouver, barring any natural catastrophe, if you buy a home now, it should be worth more in 10, 20, 30 years time.

Vancouver is a city with limits. Ocean, mountains and the ALR limit the amount of available land. With increasing demand and a finite amount of land, real estate prices will naturally rise over time. It’s supply and demand 101, and real estate is a commodity in demand.

Anyway – here’s the article:

It’s down, but not out.

To one expert observer, last month’s 32-per-cent drop in year-over-year home sales in Metro Vancouver looks more like a cyclical trend than a harbinger of a bursting bubble in the Metro Vancouver housing market.

Data released this week by the Real Estate Board of Greater Vancouver indicated that sales volumes fell significantly in September compared to the same month in 2011 – 1,516 properties last month compared to 2,246 in September 2011.

Prices haven’t followed the sales volume trend. The real estate board reported that the composite benchmark price fell 0.8 per cent compared to September 2011, and is down 2.3 per cent in the last three months.

Tsur Somerville, who holds the Real Estate Foundation of BC Professorship in Real Estate Finance at the University of B.C., says the trends fall within the normal cycle.

The Metro market isn’t as popular as it was a year ago when the 2010 Winter Olympic spotlight was still warm.

“Sales started being lower year-on-year last November. I want to see whether that (trend) accelerates or not before I start saying that things are much worse than we were thinking about,” Somerville said in an interview.

“People aren’t standing in line overnight at every condo centre, and it’s not a sure thing. There are (housing construction) projects that are struggling and there are projects that are doing well. It doesn’t look exuberant but it looks pretty normal.”

Stats from the real estate board indicate that it’s taking a few days longer to sell a house, compared to last year.

Average time on the market for a house sold in September 2012 was 53 days, compared to 52 in September 2011.

Houses sold in August 2012 after an average 57 days compared to 48 days a year earlier.

Andrey Pavlov, a professor of finance at Simon Fraser University, has a different take on the sales trend.

He thinks Metro Vancouver single-family home sales prices are substantially lower than what the real estate board’s benchmark number indicates.

“The indices are down only slightly, but this is misleading,” Pavlov said in an email. “In an up market everything sells, good and bad. In a down market, only the best properties sell. So it takes a while for transaction-based indices to reflect the true decline in prices.

“My casual observation of single-family homes (land value only) in Kits(ilano) suggests 10 to 15 per cent declines already, with a lot more likely to come.

“New mortgage rules and troubles in China certainly play their role. But more importantly, the Vancouver market has been substantially over-valued relative to other North American markets for a while now.”

Pavlov said real estate prices in Metro Vancouver are now higher than San Francisco — the most robust regional economy in the world thanks to Silicon Valley — and are “just about comparable to New York City.”

In spite of that, rents are half as high, and incomes for the same occupation are only a half to two-thirds as high. On top of that, the ability of U.S. taxpayers to deduct mortgage interest expense means its “far more expensive to own property in Canada relative to the U.S.”

“So there is no long-term reason for price-to-rent ratio in Vancouver to be higher than that of other highly desirable markets,” Pavlov wrote.

He also pointed to “competition among cities for people and investments” as an adverse factor for Vancouver.

Real estate marketer Cam Good noted that Metro has fewer offshore investors and immigrants looking to get into the market compared to a year ago — and he believes that’s having an overall effect on sales and prices.

“The fact is that the shine has gone off Canada a little bit since we closed our investor immigration program,” Good said. “We are seeing through our business in Hong Kong and the U.S. more demand for the U.S.

He said the U.S. investor immigration program, called EB-5, is considered a better option for wealthy immigrants.

“The easiest way for Chinese to immigrate into Canada was by depositing $800,000 with our governments for five-and-a-half years. They can’t do that any more.

“We’re still, luckily, experiencing the follow-through on prior commitments — kids coming to school, other family members already here. But in terms of the new people coming over, there is definitely less.”

Nonetheless, he said some Metro markets are still strong. He pointed to Coquitlam, along the Evergreen Line light-rail transit corridor, as an area that’s attracting interest.

Vancouver’s red hot housing market has taken on a distinctive fall chill, which has many would be buyers and sellers sitting on the fence right now.

Christine Jassen and her partner are looking to cash in on their biggest asset by selling their 52-year-old ranch home on Vancouver’s tony west side for just over $1.9 million.

“I’m in my 50s; it would be wonderful to have an account full of a few hundred thousand dollars, absolutely.”

But while last year this home would have likely seen multiple offers, it’s now been on the market for 130 days with no takers. It’s even had a price reduction.

Realtor Lorne Goldman, who specializes in real estate on Vancouver’s west side, says he’s seen the price of some listings drop by 10 per cent recently.

“I think buyers are hoping ‘the bubble’s going to burst, the bubble’s going to burst,” but you know, people have so much equity in their houses, it’s gone up so much, nobody’s really forced to sell,” he told CTV’s Steele on Your Side.

But there are also lots of ‘house rich, cash poor’ residents in Metro Vancouver whose yearly property taxes have soared beyond their ability to pay – seniors on a fixed income who bought properties years ago before the prices skyrocketed.

Blair Mantin, bankruptcy trustee at Sands & Associates, says seniors are the fastest growing segment of people he sees who are in financial trouble.

He calls them the grandpa debtor: “We deal with people when they’re in a situation where they can no longer pay their bills and need to take some steps, whether that’s a payment plan, or to sign themselves into bankruptcy,” Mantin said.

Seniors are less likely to be able to pay off debt because they can’t count on their income going up.

“Once they’re on a fixed income it’s pretty tough to chisel away when you’re only able to make the minimum payments,” he said.

Many homeowners in high-end neighbourhoods are looking for relief.

This year, 31,291 B.C. residents over the age of 55 have registered to defer their property taxes. Of those cash-strapped homeowners, 3,000 are in the city of Vancouver.

Source: Darcy Wintonyk and Lynda Steele, CTV British Columbia

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The Toronto and Vancouver housing markets have cooled rapidly in the wake of Ottawa’s latest bid to stop a bubble, with many first-time buyers knocked out of the running.

Finance Minister Jim Flaherty put the July 9th changes into effect to curb growing mortgage debt levels and take some steam out of house prices. Among other things, the new rules cut the maximum length of insured mortgages to 25 years from 30.

The changes have sparked a debate in Canada. Some industry players and economists worry that the impact will be so widespread and long-lasting that they want Mr. Flaherty to consider rolling some of them back. But with prices that some still deem overvalued and new fears over consumer debt, others say the changes aren’t enough and must be followed by a hike in rates.

Among the latter is Toronto-Dominion Bank chief economist Craig Alexander, who estimates that national home prices are 10 to 15 per cent too high.

He released a report last Thursday predicting the July changes will shave three percentage points off prices and five points off sales by next year.

“Our models suggest that had the government not tightened lending mortgage rules between 2008 and 2011, the Canadian household debt-to-income ratio would have reached 160 per cent this year – the level that households in the U.S. and U.K reached before sending their economies and housing markets into a tailspin,” Mr. Alexander wrote.

While debt burdens are lower than they would have been, they’re still at troubling levels. Moody’s Analytics said in a separate report that economic headwinds will increasingly cause consumers to struggle with their debt loads over the next few years.

And although the mortgage insurance rule changes have curbed house sales and debt levels somewhat, the impact on prices has been relatively fleeting, Mr. Alexander said. Without rate increases, consumers still have a strong incentive to take out large mortgages, fuelling overvalued prices, he argues.

The impact of the changes is predominantly being felt by first-time home buyers because they are typically the ones who require mortgage insurance. Insurance is mandatory in Canada for borrowers who have a down payment of less than 20 per cent, which has traditionally been about 35 to 40 per cent of the market.

Brian Hurley, the CEO of Genworth Canada, the second-largest mortgage insurer, said business slowed in August as a result of the rule changes. He would like Ottawa to revisit the rules later this year, and consider reversing some of the changes.

“These are pretty dramatic changes, and I think they’re getting close to the tipping point,” he said in a recent interview. “We see really qualified first-time home buyers with very high credit scores now not meeting the bar because they can’t afford a 25-year amortization. These people should be getting a home.”

Eric Lascelles, chief economist at RBC Global Asset Management, approves of most of the rule changes, but said there is a risk that they are being overdone to compensate for ultra-low mortgage rates.

“I wonder if the drop from 30 to 25 years amortization might be regretted in a decade when interest rates have normalized and 25-year-olds are being told they cannot make mortgage payments past the age of 50, even though they expect to work until 65,” he said in an e-mail.

Traditionally, the banks have applied mortgage insurance rule changes to all mortgages – even those with large down payments that don’t require insurance. But that hasn’t been the case this time, Mr. Alexander said.

“The banks are basically not applying the 25-year limit to the non-high-ratio mortgages,” he said in an interview. “That’s one of the reasons why the mortgage insurance rule changes had a more muted impact on the market, because really the segment that’s being significantly hit is the first-time buyers.”

Jim Murphy, the CEO of the Canadian Association of Accredited Mortgage Professionals, said that while Mr. Alexander’s prediction that the changes will dent sales by five percentage points could be correct, the impact on the insured portion of the market appears to be more like 15 per cent. “It’s having a bigger impact on first-time buyers,” he said.

On Thursday, the Toronto Real Estate Board said sales of existing homes in the country’s most populous city fell almost 12.5 per cent in August from a year ago. But the average price rose by almost 6.5 per cent, to $479,095.

One day earlier, Vancouver’s real estate board said August sales were the second-lowest level for that month since 1998, while the average price of a home in the Greater Vancouver Area was down 0.5 per cent from a year ago.

Source: Tara Perkins, Globe and Mail

The average price of homes sold in B.C. is forecast to fall 7.8 per cent this year, but that doesn’t mean the price of a typical home will drop, the B.C. Real Estate Association’s chief economist Cameron Muir said Thursday.

The average Multiple Listings Service price is down and will continue to fall because fewer single-family homes in tony neighbourhoods are selling, while more less-expensive homes are selling, Muir said, adding that there has been a noticeable lull in demand for single-family homes in Vancouver since January of this year.

As well as calling for a drop in average prices, the BCREA’s third-quarter housing forecast calls for a drop of four per cent in the number of homes sold in B.C. this year offset by an increase of 7.5 per cent next year.

“MLS residential prices are expected to remain relatively stable this year and through 2013, with changes in average price statistics largely the result of a differing mix of home types sold and shifting regional demand patterns,” Muir said, adding that the lull in demand is likely caused by some advance buying in 2011, poor job growth in 2011 and tighter mortgage regulations brought in by the government earlier this summer.

The average MLS residential price in B.C. is forecast to drop 7.8 per cent to $517,500 this year, and remain relatively unchanged at $519,000 in 2013.

Source: Tracy Sherlock, Vancouver Sun

While owning a single-family detached bungalow in Vancouver would take up 91 per cent of a typical household’s pre-tax income according to an RBC report, a Vancouver mortgage broker doesn’t expect a huge drop in prices anytime soon.

Mortgage broker Dave Foran said he expects the market to pick up in September, once the normal summer lull is over.

While prices have come down a bit during the lull, those decreases are not reflected in the latest RBC Economics Housing Trends and Affordability Report, released Monday and which covers the second quarter of 2012, said Robert Hogue, senior economist at RBC.

It found that “extreme unaffordability conditions” in the Vancouver housing market are dragging down the provincial and national measures as well.

“Housing affordability in British Columbia remained poor and worsening in the most recent quarter,” said Robert Hogue, senior economist at RBC. “The situation is far less severe in other parts of the province. In Victoria, for instance, the share of income needed to carry the costs of a mortgage at market prices for some housing types is almost half that of Vancouver.”

Hogue said he expects the next quarterly report will show improved affordability due to falling prices, but that an interest rate hike early next year would send the cost of owning a home in Vancouver upward again. RBC expects the Bank of Canada will raise interest rates in the first quarter of 2013, Hogue said.
Foran’s clients seem to be on the same page as RBC.

Foran said he has a higher-than-average number of clients with pre-approved mortgages waiting to see if prices will come down, while many don’t want to wait because they’re concerned about interest rates going up.

“Some are being quite cautious, while others are jumping in to get a good interest rate,” Foran said. “I don’t see a huge drop in prices coming or a huge increase in interest rates.”

While Foran agreed that single family homes in Vancouver are not very affordable, he said there are many other options, such as townhouses or condos, that are still within reach.

“A lot of the builders are getting away from single-family homes,” Foran said. “I think people are going where they can afford.”

Vancouver has the least affordable houses in the country, by far, although resales are falling and the market has cooled. Year-to-date resales have fallen 18 per cent in Vancouver, compared to a year ago, while the Real Estate Board of Greater Vancouver reported that July sales were the lowest total in the region since 2000, with sales 31.2 per cent below the 10-year July sales average.

The new housing price index slipped 0.9 per cent in Vancouver in June 2012, compared with June 2011, Statistics Canada reported earlier this month, while the MLS Home Price Index composite benchmark price for all residential properties in Greater Vancouver over the last 12 months has increased 0.6 per cent to $616,000 and declined 0.7 per cent in July 2012 compared to June 2012.

New mortgage rules were brought in last month that shorten the maximum amortization to 25 years from 30, which is also expected to dampen the market.

Despite these factors, affordability declined for all housing categories, with the RBC measures for Vancouver going up between 0.4 percentage points and 2.2 percentage points in the second quarter.
The report says that in Vancouver, home ownership costs, including mortgage payments, utilities and property taxes, take up 91 per cent of a typical household’s monthly pre-tax income. As a comparison, Edmonton’s affordability measure is 32.4 per cent and Toronto’s is 54.5 per cent.

Source: Tracy Sherlock, Vancouver Sun