Real Estate Market in Vancouver – The Last 12 Months
// August 29th, 2009 // Real Estate
Vancouver BC real estate market grew for almost seven consecutive years, one of the longest and fastest growths ever registered in Canada. From 2001 to 2007, average home prices almost doubled, with inflation staying below 14% during the same time. Obviously this situation meant that many people, especially the ones entering the real estate market for the first time, couldn’t afford just to buy a home.
After the US real estate market got into problems, its Vancouver sibling still worked fine for some time and managed to grow until the beginning of 2008. Nevertheless, the market slowed down as it’s been influenced by the pressure of affordability demand, and the market freeze continued for a few months. The average price got stable at first, but later decreased. As the global economic crisis became an issue during autumn 2008, the sales of Vancouver real estate fell to extremely low values during January and February 2009, which aroused the general panic that we would face the same long and poor crisis period such as in the USA.
If you believe the same, look at the graphs around – February 2009 was the point of rebound, not the start of stagnation! Since then, all real estate key indicators in Vancouver BC show positive trend. Sales in June 2009 were almost 6 times higher than in February and almost double confronted to the last summer. The percent change in June 2009 was 75.6% in comparison to June 2008. In December 2008, the average price drop stopped and sustained at the same level till March, and since then it keeps showing steady increase. The prices in June 2009 reached again the same point as they were in October previous year.
These fact shouldn’t seem so surprising, if we analyze the numbers in detail. The new listings change graph will show us that the inflow of new houses to the market came to a standstill in October 2008, after this point it started to decrease.
It’s because one apparent advantage residential real estate can boast – people simply have to stay somewhere. Cars, hairdressers or holidays are not an essential condition for life, but of course a shelter to stay is one. It is possible that the demand for homes decreases, but it can hardly disappear completely, even if it was only for a short time. There are certain guideliness that the supply side should keep. Your house often is the most expensive item of your general property. In the period when prices are decreasing, you can decide to keep your home and not to sell it. On the other hand this would stimulate new housing starts. Eventually, an agreement has to be reached at some moment both for sellers and buyers, and the sooner the better.
So what are the arguments for the Canadian market recovering so early, whereas the US one is still going through the crisis? The reason lays in the fact that in Canada, we had no wave of foreclosures, which was the most critical point. The Canadian institutions and individual home owners are in better financial condition than the ones in the US. It doesn’t mean we are richer; it means we are more prepared to cope with sudden financial problems. Subprime mortgage sector (the most affected one in the United States) is much smaller in Canada; our economic fundamentals are not in the best shape now, but still quite stabilized.
So what would be the most likely future situation on the real estate market in Vancouver BC? Sales and average prices are likely to rise steadily during the few oncoming months. Nevertheless, as soon as the situation gets to the same level as before the bubble burst, it should calm down, due to overall economic stagnation. Next year will be awesome especially for first time buyers – with record-low interest rates and prices still under the recent peak, properties won’t be so affordable forever!
