Time was ...
What a difference a decade makes: this theme has run through several retrospectives of the Metro Vancouver housing market in recent weeks as the region's esteemed authorities attempt to provide insights into what the future holds.
While past performance is no promise of future returns, it's been clear that a new dynamic has taken hold and the heady days of the last decade's housing boom are gone.
During a recent presentation to select local media, Cameron Muir, chief economist of the BC Real Estate Association, provided an overview that concluded that record sales figures – regardless of what year-over-year sales figures for each month indicate – are not in the cards.
The boom of the last decade was fuelled, in part, by a flight to safe assets following the dot-com bubble and the terrorist attacks on New York and Washington that helped make financing more affordable. This brought buyers into the housing market, and, in B.C., prices were bid up first by constrained supplies and then more affordable mortgages.
"You could actually buy a downtown condo in 2002 and get a positive cash flow with very little money down, and what that did was draw down inventories because they didn't have homes to trade back into the marketplace," Muir said.
Today, the housing stock is larger than it was a decade ago, the province's major markets are in balance and investors of condos need to keep a close eye on cash flow. The investor of 2013 is also savvier, armed with a wealth of data for assessing properties. Meanwhile, Muir explained, the economy is slower and, while average wages have increased, job growth is hardly robust. "We don't see any kind of record sales levels – at least in the short term – on the horizon," he said.
Prices are ...
A moderate volume of sales is helping hold prices in check.
During the Canada Mortgage and Housing Corp. (CMHC) housing outlook conference at the beginning of November, Neil Chrystal of Polygon Homes Ltd. spoke of the narrower margins developers face thanks to the discounts and incentives needed to move product. Sales are up, but prices have needed to come down to draw in buyers.
Ditto for resales, where CMHC senior market analyst Lance Jakubec said house prices experienced strong growth from 2003 to 2010 but have been relatively stable in the ensuing three years.
Most curious for Jakubec, while sales across housing types were similar, single-family home prices have seen considerable appreciation in the past three years versus the market as a whole.
"Apartment condominiums haven't really increased dramatically in price," he said. "Rowhouses have seen some appreciation, but really, the price appreciation over the past three years has been a single detached story."
Over at the BC Real Estate Association, chief economist Cameron Muir attributed the rise in single-family prices to the growing scarcity of the property type.
"Single detached homes are going to become an increasingly small part of the housing stock," he said. "Theory tells us that prices of that home type is going to get bid up because it's a finite, scarce resource."
Meanwhile, construction in the rest of the market combined with lacklustre economic activity is contributing to what Muir believes is an effective decline in prices.
"Prices have been essentially flat," he said. "In fact, if you take the inflation adjusted number, we've probably seen the prices off 5% or 6% over time." •
