Di­verg­ing pre­dic­tions for Metro real es­tate mar­ket

The Province - - NEWS - JOANNE LEE-YOUNG jlee-young@post­media.com

The Van­cou­ver real es­tate in­dus­try re­ported an­other month of higher sales and prices in Septem­ber and con­tin­ues to defy dire pre­dic­tions of a pan­demic-in­duced down­turn.

But some an­a­lysts point out frag­ile as­pects of the mar­ket, such as a ris­ing condo in­ven­tory and fall­ing condo prices.

The num­ber of real es­tate sales in B.C. year-over-year in Septem­ber in­creased 63 per cent. The av­er­age res­i­den­tial price in B.C. in­creased by 15.3 per cent com­pared to last year, and set a monthly record of $803,210. To­tal sales dol­lar vol­ume in Au­gust in­creased 88 per cent com­pared to last year, ac­cord­ing to the B.C. Real Es­tate As­so­ci­a­tion, which rep­re­sents real es­tate agents.

The Canada Mort­gage and Hous­ing Corp. has been in a high-pro­file clash with some in the real es­tate in­dus­try over its pre­dic­tion of dou­ble-digit per­cent­age price drops in mar­kets such as Van­cou­ver.

The fed­eral gov­ern­ment hous­ing agency, which has tight­ened un­der­writ­ing poli­cies for high-ra­tio bor­row­ers, has also been vo­cal about the dan­ger of fu­elling the stress of home own­er­ship in ex­pen­sive mar­kets for buy­ers with un­cer­tain fi­nan­cial prospects in a weak econ­omy.

Now, with sales and prices ris­ing, there con­tin­ues to be agree­ment about a hous­ing mar­ket cleav­ing in half, but dis­agree­ment about where this could lead.

“The over­all hous­ing mar­ket sys­tem seems to be di­vid­ing in two, and this is where risks start to ap­pear,” said Aled ab Ior­w­erth, deputy chief econ­o­mist at the CMHC.

He and oth­ers think that while prices are hold­ing and ris­ing, there are nu­ances such as fall­ing rents, a grow­ing pref­er­ence for sub­ur­ban over city lo­ca­tions, and ex­tended eco­nomic weak­ness that could hit the condo mar­ket and pull down other house prices too.

“I think it's still too early to be do­ing the happy dance. Condo prices are de­clin­ing while house prices are mov­ing higher. The re­sult is a higher av­er­age sales price as the com­po­si­tion of homes sell­ing has changed. It's very much a mixed mar­ket and the po­ten­tial fall­out from de­ferred mort­gages has yet to be re­al­ized as these de­fer­rals are only be­gin­ning to ex­pire,” said Van­cou­ver re­al­tor Steve Saret­sky.

Saret­sky adds there will be a record num­ber of new con­dos com­plet­ing this year and next. These are projects that were started dur­ing the build­ing boom which be­gan in 2016.

“That new con­struc­tion is fi­nally com­plet­ing at a time when condo de­mand has slowed, and the ren­tal mar­ket has soft­ened. These are ob­vi­ous risks that are con­tend­ing with the low­est mort­gage rates we've ever seen and a sea of liq­uid­ity pro­vided by the Bank of Canada. Hence, the short- to medium-term di­rec­tion of the mar­ket re­mains very much in flux.”

Re­al­tor Ian Watt, who spe­cial­izes in down­town Van­cou­ver con­dos, where ris­ing in­ven­tory has been more pro­nounced, said the me­dian price in Septem­ber de­creased 10 per cent from THE pre­vi­ous month, and the me­dian price de­creased 14 per cent from Septem­ber 2019.

Hous­ing starts across B.C. in Septem­ber hit 25,308, down from 33,100 dur­ing the same pe­riod in 2019.

How­ever, that is com­par­ing hous­ing starts in 2019 that ended up reach­ing a record high of 44,932, even though most fore­casts had been for the num­ber at the end of the year to be around 35,000.

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