Tuesday, May 31, 2011

Housing prices climb to global heights for latest Olympics host

BY GILBERT MOHTES-CHAN, TUESDAY, MAY 31, 2011



Home prices in Greater Vancouver, Canada, continue to rise as the region's spring homebuying season got off to a strong start. 
Buyers flocked to the market during the first quarter, fueled by heavy sales volume in the Richmond and Vancouver West areas. Although housing sales slowed in April, the benchmark housing price increased, topping $620,000.
Recent changes in mortgages rules could make it even tougher for first-time homebuyers to enter the market, considered one of the priciest housing markets in the world.
  

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This report highlights real estate market statistics and trends in the Vancouver metro area and includes a chart with detailed market data and commentary from local real estate professionals.
Overview
Greater Vancouver housing sales cooled off in April after moving at a red-hot pace the previous two months.
Canada's third-largest metropolitan area saw residential sales of single-family detached, attached and condominium properties decline 21 percent to 3,225 year-over-year, according to the latest report from the Real Estate Board of Greater Vancouver. Sales were off 8.2 percent from March. The board attributed the April sales decline to a slowdown in condo sales.
The board's benchmark Housing Price Index for all residential properties rose to $622,991 in April, up 5 percent from $593,419. The benchmark represents the sales price of a typical property within the market and is considered a more accurate reflection of prices.
A sales spurt of multimillion-dollar homes in some parts of Vancouver skewed the average sales price of a home nationally, pushing it up to $372,544 in April, according to the Canadian Real Estate Association.
An influx of homebuyers from mainland China in the past six months has triggered a wave of seven-figure housing sales, especially in the Richmond and West Vancouver locales.
The Canadian Real Estate Association reported the average sales price in April for a Vancouver residential property at $815,252, easily outpacing the average sales price tracked for 15 other major Canadian cities.
Neighboring Victoria ranked second nationally, at an average sales price of $508,005, followed by Toronto at $477,406. Vancouver real estate officials say April's residential sales reflect typical spring activity and indicate a better balance between the supply of housing on the market and demand from homebuyers.
In fact, sales were up 8.8 percent compared to the same period in 2009, and were unchanged from 2008.
In contrast, the number of homes sold and added to the market moved at a near-record pace in February and March.
Fewer new properties came onto the market in April than the year-ago period -- 5,847 compared with 7,648 in April 2010, a 23.5 percent drop. New listings were down 14 percent from the previous month.
"We are sitting on a good, strong, stable market. The consumer out there is always more comfortable with a normal, stable market," said Rosario Setticasi, president of the Real Estate Board of Greater Vancouver. "Right now we are sitting at that edge. If sales pick up, it's a seller's market again."
Here's the April sales breakdown by housing type:
  • 1,402 single-family detached homes, up 2.3 percent from a year ago; the benchmark price of $879,039 is up 7.4 percent year-over-year.
  • 1,201 condos, down 21.3 percent from a year ago; the benchmark price of $409,242 is up 2.9 percent year-over-year.
  • 622 attached homes, up 1 percent from a year ago; the benchmark price of $514,670 is up 2.4 percent year-over-year.
Unlike many of their counterparts in the U.S., Vancouver real estate professionals are seeing a steady housing market in a post-recession recovery. Because of tighter and more conservative lending practices by the nation's financial institutions, Canada's housing market isn't burdened by a glut of distressed properties as in the U.S.
"Our banking system tends to be a little more conservative in providing loans for homes. That (mortgage) meltdown did not have any affect in our banking industry." Setticasi said.
"Bank foreclosure properties are not spiking. There's the usual amount of bank foreclosures that seem to be related just to personal issues," said David Hutchinson, an agent at Century 21 In Town Realty in Vancouver.
"Foreclosures rarely are really good deals in Vancouver. There is a system in place to ensure market value of the sales price."
In British Columbia, only 0.49 percent of all residential mortgages were at least three months in arrears in February, according to the latest figures from the Canadian Bankers Association. That's up slightly from 0.41 percent during the same period a year ago, 0.27 percent in 2009, and 0.16 percent in 2008.
Canada's economy sputtered in the second half of 2008, fell into a recession, and then began to rebound by the end of 2009. Last spring, the British Columbia Business Council predicted the province would become one of the country's growth leaders over the next couple of years.
The council's British Columbia Economic Index continued to rise in the first quarter of 2011, signaling moderate growth for the province.
"Our economy seems to be clicking pretty good out here," Setticasi said. "The West Coast is a desirable area."
Desirability comes with a price, as Vancouver is one of the world's least affordable housing markets.
In a February Housing Trends and Affordability report, Royal Bank of Canada senior economist Robert Hogue wrote, "In our view, the area's poor affordability -- the RBC measures for Vancouver are still far above their long-run average -- will continue to weigh on local demand and cause a high degree of stress within the market."
Compounding the affordability issue, Hogue said, is the cost of borrowing, which is expected to rise in the next two years.
"With prices rising, there is always a concern about affordability," Setticasi said.
Yet Vancouver and British Columbia, in general, remain attractive markets for Canadians looking for better job prospects or a place to retire. Statistics show more Canadians are moving to the province than leaving, the British Columbia Business Council reports.
Considered Canada's gateway to the Pacific, Vancouver increased its global visibility as host to the 2010 Winter Olympics. It has seen a recent wave of foreign investors, especially homebuyers from mainland China, who are purchasing properties in areas such as Richmond and the west side of Vancouver.
To seize this opportunity, some brokerages have formed Mandarin-speaking real restate teams.
"The Vancouver West detached home market is red-hot with mainland China foreign investment. Some homes (are selling at) a half-million dollars over asking price," Hutchinson said.
"The Vancouver West market is now pushing the same trend eastward to traditional blue-collar East Vancouver. It's now pushing these usually affordable, older-type homes into the $1 million range."

Vancouver, Canada, market data

Vancouver Metro Area 
Population (2010 estimate)2,374,628 million
Population growth (2001-10)+19.5%
Total closed sales (2010)30,595
% change closed sales (2009-10)-14.2%
% change closed sales (April '10-April '11)-8.2%
Sales per person1 sale per 78 people
Benchmark sales price (April 2011)$622,991
% change benchmark sales price (April '10-April '11)+5%
% mortgages in arrears (British Columbia, Feb. '11)0.49%
% of sales distressed (March 2011)+60%
% household income needed to afford a house77.8%
% unemployment (April '11, 3-month moving avg.)11.8%
Walk Score72
Rent-vs.-ownership ratio (% households in 2006)35%/65%
Sources: Statistics Canada, British Columbia Ministry of Citizens' Services, Real Estate Board of Greater Vancouver, Canadian Bankers Association, Walk Score and RBC Economics Research.