BCREA says mortgage rules triggered 20.5% dip in sales
For Sale signs provide a barometer for current real estate sales on the west side of Vancouver. The average home price could drop to $720,000 next year, according to the B.C. Real Estate Association.
That's the view of University of B.C. real-estate economist Tsur Somerville, who was asked to respond to new market forecasts released by the B.C. Real Estate Association.
On Tuesday, BCREA chief economist Cameron Muir said tighter mortgage rules implemented by Ottawa this summer triggered a 20.5-per-cent drop in Vancouver home sales, in a market that was already softening.
The plunge in sales will cause a six-percent price decline in Vancouver's average home price, Muir said, to $734,000.
The association sees sales rebounding by 13.7 per cent in 2013, but predicts prices will slide by another two per cent, to $720,000.
But these declines should be seen in the context of unrealistic gains in 2011, Muir said, when Vancouver's average home price surged by 15.4 per cent, to $780,000.
Realtors say that last year wealthy Chinese buyers drove prices in Richmond, West Vancouver and Vancouver's west side to heights that skewed regional aver-ages upwards, but the reverse has happened in 2012, as these markets deflate and pull regional averages lower.
Right now, buyers seem content to sit on the sidelines in Vancouver, but people expecting to win massive discounts a few years down the road will be disappointed, Muir says.
"We don't see a recession on the horizon, and we don't see interest rates going up any time soon, so what kind of financial calamity is going to happen in Vancouver to get people to sell for 75 cents on the dollar?" Muir asked.
Employment is tepid but stable in B.C., so it would take an unlikely "external macroeconomic" shock to cause a market crash in Vancouver, BCREA economists believe.
Muir acknowledged, but discounted, potential dangers put forward by more pessimistic analysts, including a severe "double-dip" recession in the U.S., which is politically deadlocked due to a massive debt load, a breakup of the economically-depressed European Union, or an accelerated decline in China's economy.
In an interview, Somerville said Vancouver's market is definitely weakening, but he expects prices to be more or less flat in 2014.
"If over the next year prices fell by 10 per cent I wouldn't be shocked, but I think [prices] would rebound," Somerville said.
"China slowing down dramatically and causing dropping commodity prices would be dramatic for B.C. But I don't see anything out there right now, to push us into major price declines."
At the same time, the gaudy gains that Vancouver's real-estate market has enjoyed may be a thing of the past.
"I heard a great anecdote from a realtor on Vancouver's west side," Somerville said.
"During the boom, the sign of victory for people from overseas was winning bidding wars. But now, it's saying you are getting a good price."