Average price of Metro Vancouver home now almost $663,000, above pre-recession levels

[Hed Kandi]

Average price of Metro Vancouver home now almost $663,000, above pre-recession levels
Derrick Penner

Sun

Thursday, April, 01, 2010

Metro Vancouver's cheap-mortgage-fuelled real estate market has overshot its previous peak for prices with indications it will keep going, albeit more slowly, before cooling with the rise in interest rates.

February saw the average property price hit $662,741 in the area of Metro Vancouver within the Real Estate Board of Greater Vancouver. (The board does not cover Surrey, Langley or White Rock.)

That is well above the previous $624,639 peak price, which the region saw in May 2008.

Now, the Teranet-National Bank housing price index, a more complicated measure of property prices that analyses data from the repeat sales of homes, also indicates that all the deflation of home prices that occurred during the recession had been regained by January, and will keep going, but more slowly.

The Teranet-National Bank index, which runs a couple of months behind the reports of real estate boards, found January was the ninth month in a row that the national price index increased, though it did so by the smallest margin in the past nine months.

"Even in Vancouver, we've gained back everything we lost," Simon Cote, an analyst at the National Bank of Canada said in an interview. "The pace might be slowing a bit, but they are still going up."

Metro Vancouver prices, on the Teranet-National Bank index, reached their recession trough in May 2009, but rose 11.7 per cent between May and January.

Metro Vancouver prices rose .9 per cent between December and January, the biggest gain among the six major markets included in the Teranet-National Bank index.

National Bank analyst Marc Pinsonneault, in a note to clients, said the January price increases can still be considered "vigorous, especially in Vancouver and Toronto," but that developments in most markets back up National Bank's view that increases will slow down.

Pinsonneault said that after eight months of briskly rising prices, Metro Vancouver's market has "shifted from a favourable-to-sellers market to a balanced market."

Cote added the bank is "expecting that the increase in supply, both of new construction and more homes coming to the [resale] market, will bring the market back into equilibrium."

Mortgage rates will also be a factor. Canada's major banks raised their posted rates on five-year fixed mortgages .6 of a percentage point on Monday and Tuesday to 5.85 per cent, which will squeeze some buyers out of the market, according to Cameron Muir, chief economist for the B.C. Real Estate Board.

"What it means for purchasers is that it erodes their purchasing power" by reducing the size of mortgages buyers are capable of carrying, he said.

For a family with a household income of $70,000, Muir said, this week's bump in five-year rates for buyers seeking five-year terms reduces the final amount they can pay for a home by $35,000.

The increase, he added, "is a fairly hefty lift."

© Copyright (c) The Vancouver Sun

[delboy]

I can't see how these prices are sustainable. Mortgage rate hikes are gong to impact affordability, which will put downwards pressure on prices.

I'm an homeowner, but I welcome a more balanced market at the cost of some equity. I fear that house prices in this city are creating an unbalanced market and we may well see fewer young people here in the future.

[Yume-sama]

So it stands to reason we should make them 7% more expensive and add in HST.

You're lying to yourself if you think prices won't magically jump to compensate new home buyers.

[delboy]

Originally Posted by Yume-sama

So it stands to reason we should make them 7% more expensive and add in HST.

You're lying to yourself if you think prices won't magically jump to compensate new home buyers.

first time buyers drive the market. New rules have been set by the government and fewer will qualify (10 percent down - tighter controls on debt to own ratio all calculated on a 5 year fixed term, not a floating rate). Add in higher mortgage costs and lower prices are likely.

As for the HST...we are talking about homes not cups of coffee. Buyers will hit a ceiling as far as affordability and it is likely that hst on new homes will be absorbed into whatever price first timers are able to pay. if half a million is the max then half a million it will be not half a mill plus 7 percent. Market values are all that count at the end of the day.

Not suggesting a collapse, simply a correction to allow first timers to drive the market as they always have.

As I said, I'm in the market, makes little difference to me, but makes a hell of difference as to what kind of city vancouver will be. Present prices have changed this city and not in a good way. When average earners can't afford average homes, there is a problem.

One thing i really hate about vancouver is it's obsession with real estate - it's nice but not 663,000 nice.

[Yume-sama]

I wonder what the average rent in Vancouver is / has been the past few years.

[Spoolmak]

why is this HST coming into affect, when minimum wage is 8 bucks n hr, avg house price in vancouver is $663,000 and its so effing hard to find a decent job. Absolutely ridiculous. I want to move but the only place in Canada other than BC I would consider moving to is Toronto and thats way to far.

[Yume-sama]

Ewww. Toronto.

Actually it's not much cheaper there. And they have HST. And their jobs market is like non-existent.

Maybe something more Central for you...

[mrjauk]

Originally Posted by Yume-sama

I wonder what the average rent in Vancouver is / has been the past few years.

Real rents have decreased recently. Since 2003 (start of the RE bubble) real rents are down about 20%.


http://cuer.sauder.ubc.ca/cma/index.html#

[Spoolmak]

really ? how much does it cost in toronto to buy a house? And maybe calgary, only because of its proximity to BC

[Yume-sama]

Originally Posted by Spoolmak

really ? how much does it cost in toronto to buy a house? And maybe calgary, only because of its proximity to BC

It's slightly misleading because the GTA is so big, but officially the average price of a home in the whole area is $431,509 (up 19% from last February).

Calgary is booming again, going up $10,000 or so a month, with an average price of $469,074 the last 30 days (still not up to par with pre-recession days).

But taxes in Alberta, for everything, are much lower Which is why that is where I am officially based, of course! It's worth paying a little more to live there if you can stand it.

[Zassk]

Toronto is also getting the HST...

[cabotp]

Originally Posted by delboy

I can't see how these prices are sustainable. Mortgage rate hikes are gong to impact affordability, which will put downwards pressure on prices.

I'm an homeowner, but I welcome a more balanced market at the cost of some equity. I fear that house prices in this city are creating an unbalanced market and we may well see fewer young people here in the future.

I think of a big reason of how people are affording these prices. Has a lot to do with the multi dwelling houses and now with the addition of the laneway house in Vancouver at least. It allows you in sense buy more for less. You buy the same size house, but you end up renting out parts of it to help pay for the mortgage.

I realize of course not everyone is in this position. But I feel it is a big reason for it.

[trofirhen]

Originally Posted by Spoolmak

really ? how much does it cost in toronto to buy a house? And maybe calgary, only because of its proximity to BC

I think that in Calgary it's the booming oil-based economy that keeps prices up. Even in Fort McMurray, houses are around $600,000 or so, on average, believe it or not.

A question please: what is the HST ?

[idunno]

might have to look that one up now.

[delboy]

Originally Posted by mrjauk

Real rents have decreased recently. Since 2003 (start of the RE bubble) real rents are down about 20%.


http://cuer.sauder.ubc.ca/cma/index.html#

relatively affordable rents are the only saving grace in this city. Wages are laughably low compared to owing but about right for renting. The inflated cost of living here largely relates to home ownership. Cities like London, San Fran, and New York have more expensive re but higher wages and are actually more affordable -. However, rent in all three is higher than here.

Vancouver should have had rules in place to limit foreign ownership of new developments to preserve affordable housing stock. I fear that Vancouver has already become a resort city.

[delboy]

Originally Posted by cabotp

I think of a big reason of how people are affording these prices. Has a lot to do with the multi dwelling houses and now with the addition of the laneway house in Vancouver at least. It allows you in sense buy more for less. You buy the same size house, but you end up renting out parts of it to help pay for the mortgage.

I realize of course not everyone is in this position. But I feel it is a big reason for it.

Yes - owners have had to find creative ways to pay the mortgage - shared ownership has also become common. Doesn't say much about the place when you have to resort to illegal rental accommodation in the basement to own a very average home - although I suppose it creates better density. As for laneway housing, I see this more of a case of the rich getting richer as they will require considerable investment to build the structure.

A friend of mine bought a house in east van for around 800,000 - he has a bst suite and a student in an attic conversion and he's still struggling.

Looking back if I was starting out in my early twenties making an average wage, I'd be looking at moving to some place more affordable. It was not like that at all in 1993 when I moved here.

[delboy]

Originally Posted by trofirhen

I think that in Calgary it's the booming oil-based economy that keeps prices up. Even in Fort McMurray, houses are around $600,000 or so, on average, believe it or not.

A question please: what is the HST ?

pst and gst combined as one tax - however, some items that were previously pst exempt will now be taxed - some things are restaurant meals, haircuts, gym memberships, etc which in effect increases the cost of these things by 7 percent. Oh, and new homes. Full tax will now be applied to private sales of used vehicles.

[Blake]

Just for clarification, the only effect HST will have on home buyers will be for purchasers of brand new homes under $475,000. In addition, HST will be added to a few closing costs like lawyer's fees etc.

Sellers on the other hand will have to pay HST on top of real estate commissions.

All in all, the HST will only add a couple of hundred dollars to the purchase of a re-sale home. It's economic effect on the market should be negligible (although consumer psychology says otherwise).

That being said, the pending increase in interest rates is going to be a much bigger factor.

[Blake]

Originally Posted by delboy

Yes - owners have had to find creative ways to pay the mortgage - shared ownership has also become common. Doesn't say much about the place when you have to resort to illegal rental accommodation in the basement to own a very average home - although I suppose it creates better density. As for laneway housing, I see this more of a case of the rich getting richer as they will require considerable investment to build the structure.

A friend of mine bought a house in east van for around 800,000 - he has a bst suite and a student in an attic conversion and he's still struggling.

Looking back if I was starting out in my early twenties making an average wage, I'd be looking at moving to some place more affordable. It was not like that at all in 1993 when I moved here.

Why somebody would buy an 800,000K house they can barely afford?

Reminds me of our neighbours. They lived in a $350K condo, and walked into an open house of a $980K home. They loved it and wrote an offer on the spot. They offered $950 because they couldn't afford the extra $30K. Yikes.

There are plenty of affordable multi-family options and homes in the suburbs in line with most people's budget.

A place like Maple Ridge or Surrey may not be utopia for most people, but we need to get over this ideal that everyone deserves to live in the City of Vancouver.

[Yume-sama]

Unfortunately it is human nature to always want more. But it's the people who want irresponsibly more that ended up causing the recession in the USA, which spread everywhere.

Though, if they can get a mortgage on a $950k house in Canada, they must be doing alright. You actually have to QUALIFY up here. What a concept.