Tsur Somerville, who holds a real estate foundation professorship at the University of B.C., expects prices to stay flat for a while “because our prices are high relative to what people think they should be,” Somerville said. “Our price adjustment will come from prices being flat for awhile and letting income catch up to where prices are.”
“Most people don’t have to sell their house,” he said. “You bought it for $200,000. The price is now $150,000. Unless you have to, why would you sell it?”
For prices to go down significantly, contended Somerville, “You need people who have to sell, either because the economy has collapsed and they don’t have any income or developers have built a whole bunch of units that are unsold and the bank is screaming at them or foreclosing or something like that.”
None of those conditions appears imminent.
Somerville said it would take “some negative shock,” such as an economic meltdown or mortgage interest rates jumping from four per cent to nine or 10 per cent, to trigger lower prices.
While prospective sellers are waiting, the numbers indicate that prospective buyers are a bit shy as well. “The market right now is both slow and tentative. There are a lot of people out there being very tentative because they’re not really sure where things are going,” Somerville said. “I can’t say how many buyers are in the market — I want to differentiate between that and the prices they are willing to pay. Maybe there are people who are actually interested in buying, but they’re either waiting for prices to be at a certain point, or they’re making offers that aren’t being accepted. I can’t differentiate between those things.”
“To get prices to really tank, you’ve got to have something happen. Either you’ve got to have overbuilding, or you’ve got to have some big change in the world of finance, such as large movement in interest rates or a financial disruption, or you’ve got to have a real negative economic shock,” Somerville said. “You’ve got to have some combination of those, or one of those to make prices drop dramatically.”
Overbuilding of single-family homes in Metro Vancouver is difficult because land is so limited, Somerville said.
Cameron Muir, B.C. Real Estate Association chief economist, thinks if buyers are waiting, they could be waiting a long time.
“Three years ago we saw the largest financial crisis since the Great Depression and an ensuing global recession. If that’s wasn’t enough to trigger a correction in an asset bubble, I don’t know what is,” Muir said.
“The condo market in Vancouver has not been ‘hot’ since 2009, and perhaps even earlier than that. Prices on the condominium side have been relatively flat for three years, so that doesn’t signal any kind of asset bubble welling up,” Muir said. “There has also been little speculation in the marketplace over the past few years and home builders have been kept in check in terms of their total units in production.
- The condo market in Vancouver hasn't been hot since 2009?
- Little speculation in the market place?
- Home builders have been kept in check in terms of total units in production?
the risk of a more difficult adjustment will increase if builders do not soon begin to slow the pace of new construction.
"a market that will have a lot of units for sale and more coming on stream."
As of Feb. 29, 2012, there were 6,000-plus condos for sale through the Vancouver Real Estate Board - up 15% compared to the previous year.At the same time, sales of used condos were down by 18%.Add to this the fact that - according to MPC Intelligence - there are some 8,000 pre-sale condos being launched in the first six months of this year.
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