Vancouver home prices to drop 15 per cent in two to three years: TD Bank

[Harvey Specter]

You always hear about the prices dropping but I think 15% seems about right seeing how the prices have been increasing due to low interest rates. It really is risky to buy so called "investment" properties in this market thinking you might make a profit a year or two from now.

TORONTO — Vancouver and Toronto home prices will probably experience a relatively mild downturn — of about 15 per cent — in two to three years, but not the dramatic drop that hit the United States a few years ago, according to a report by the Toronto-Dominion banking group.

TD said Monday the 15 per cent decline in Canada's two most expensive cities is likely in a few years but it will be gradual, rather than the sudden drop of 30 per cent seen in the U.S. real estate market after it peaked in late 2007.

The bank's analysis is consistent with other warnings that Vancouver and Toronto real estate is generally overpriced, but supported by low interest rates and a stable economy.

That's not likely to change this year unless there's a major economic shock from outside the country, the TD report said.

In the meantime, TD says Vancouver's real estate market is stabilizing after soaring last year and Toronto prices appear poised for a robust increase.

"Some observers might point to the recent data in Vancouver as evidence that housing activity is going through a long-awaited correction. But the jury remains out. As we've pointed out, despite the recent pull-back in sales, the market remains in balanced territory and underlying prices are continuing to expand," wrote TD economists Derek Burleton and Leslie Preston.

"In our view, Vancouver's market is likely to show increased stability over the remainder of this year. Meanwhile, there appears to be little stopping Toronto's market from recording robust gains and continuing to play catch-up with its West Coast counterpart."

They said the market segment that's at greatest risk in both cities is condominiums, but suggested there may be enough demand to absorb the new supply that has been built in recent years or currently under construction.

Referring to data supplied by Canada Mortgage and Housing Corp., the report says between 20 and 25 per cent of condominiums in Toronto and Vancouver are bought by investors who plan to rent them out.

"For now, the rental markets in Toronto and Vancouver are both quite strong with low vacancy rates, helping to mitigate the risks in the near term. Farther out it depends on the underlying strength of the economy and migration into each city," the report said.

"Nonetheless, even if demand stays robust, we suspect that a share of the bulge in units currently under construction will remain unsold and lead to growing inventories."

The housing market has been driven by historically low interest rates, which appear to be continuing to fuel the robust building pace despite economists' expectations of some softening.

Super-low mortgage rates and high demand have driven housing sales and prices higher, especially in large urban centres such as Toronto and Vancouver, particularly in the hot condo market.

However, CMHC has said the condo trend is not sustainable and many analysts agree.

Some economists have warned this frenzied pace of building could leave a glut of supply on the market if demand weakens.

The Bank of Canada and federal Finance Minister Jim Flaherty recently stepped up their warnings to Canadians to moderate borrowing on real estate, declaring household debt to be the domestic economy's number one enemy.
© Copyright (c) The Vancouver Sun

Read more: Vancouver home prices to drop 15 per cent in two to three years: TD Bank

[wstce92]

I think they're being conservative. Will probably happen a lot sooner in Vancouver.

[iEatClams]

The overall # of sales in Vancouver has gone down, and is at a 10-year low.

-Average prices have gone down, but that's mostly due to the the prices of High end homes on the west side coming down. These high prices drive down the average.

- Median prices have basically stayed the same.

People have been saying that the housing market will be coming down for the last few years, for example, housing prices went up by + 15-30 % in many areas last year, but maybe it's finally time.

More and more foreigners are buying in Toronto and Calgary, so that might be taking some of the demand away.

[iEatClams]

Here's some data from the Real estate board of Greater Vancouver.

Spring activity remains balanced in the Greater Vancouver housing market
June 4, 2012 – The number of properties listed for sale continued to increase in the Greater Vancouver housing market in May. The number of sales decreased year over year, but remained relatively constant compared to recent months.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver reached 2,853 on the Multiple Listing Service® (MLS®) in May 2012. This represents a 15.5 per cent decline compared to the 3,377 sales recorded in May 2011.

May sales were the lowest total for the month in the region since 2001 and 21.1 per cent below the 10-year May sales average of 3,617. However, sales have been constant throughout the spring months, with 2,874 sales in March and 2,799 sales in April.

“Home sellers have outpaced buyers in recent months, however, there continues to be an overall balance between supply and demand in our marketplace,” Eugen Klein, REBGV president said.

New listings for detached, attached and apartment properties in Greater Vancouver totalled 6,927 in May 2012. This represents a 16.8 per cent increase compared to May 2011 when 5,931 homes were listed for sale and a 14.4 per cent increase compared to April 2012 when 6,056 homes were listed for sale on the region’s MLS®.

Last month’s new listing total was 15.3 per cent above the 10-year average for listings in Greater Vancouver for May.

At 17,835, the total number of homes listed for sale on the region’s MLS® increased 7.9 per cent in May compared to last month and increased 21 per cent from this time last year.

“Our sales-to-active-listing ratio sits at 16 per cent, which is indicative of balanced market conditions,” Klein said. “As a result of this stability, home prices at the regional level have seen little fluctuation over the last six month.”

The MLS® HPI benchmark price* for all residential properties in Greater Vancouver currently sits at $625,100, up 3.3 per cent compared to May 2011 and up 2.4 per cent over the last three months. The benchmark price for all residential properties in the Lower Mainland** is $558,300, which is a 3 per cent increase compared to May 2011 and a 2.3 per cent increase compared to three months ago.

Sales of detached properties on the MLS® in May 2012 reached 1,180, a decline of 24.8 per cent from the 1,570 detached sales recorded in May 2011, and a 6.1 per cent decrease from the 1,256 units sold in May 2010. The benchmark price for detached properties increased 5.1 per cent from May 2011 to $967,500.

Sales of apartment properties reached 1,156 in May 2012, a decline of 5.9 per cent compared to the 1,228 sales in May 2011, and a decrease of 14.6 per cent compared to the 1,354 sales in May 2010.The benchmark price of an apartment property increased 1.7 per cent from May 2011 to $379,700.

Townhome property sales in May 2012 totalled 517, a decline of 10.7 per cent compared to the 579 sales in May 2011, and a 5.3 per cent decrease from the 546 townhome properties sold in May 2010. The benchmark price of a townhome unit increased 0.9 per cent between May 2011 and 2012 to $470,000.

*Editor’s Note: Benchmark prices underwent a re-calculation this month in order to more accurately reflect trends measured by the MLS® Home Price Index. There were no changes to the calculation of index values.

This re-calculation involved aggregating benchmark prices using the sales weighted approach for the reference period (i.e. January 2005) and thereafter linking movements in aggregate benchmark prices to their corresponding MLS® HPI.

The methodology, available at MLS® Home Price Index, will be updated later this week.

[TRDood]

I will believe it when I see it.

[68style]

Thank goodness TD is around to predict the fucking future! Maybe I should just give them all my money right now since they know exactly what's going to happen for the next 2+ years.............

[Ch28]

Originally Posted by TRDood

I will believe it when I see it.

+1

We've been hearing the same thing for years

[impactX]

If they start cracking down on corruption (on a massive scale) in the PRC, then I can sort of believe it.

[AWDTurboLuvr]

You should see the amount of vacant condos that are in Toronto right now, 15,500 NEW condos sitting vacant and unsold...ridiculous. Oh and they're still building.

[asian_XL]

imagine when it goes down 15%, asians will bring 2x more money into Canada to buy more houses.

[Tapioca]

Prices in Metro Vancouver should really drop by about 30% before real estate reaches the point of affordability for the average working resident.

[Hondaracer]

Desirable properties will never go down

[AWDTurboLuvr]

Originally Posted by azndude69

Here's some data from the Real estate board of Greater Vancouver.

If you read carefully in the parts you bolded, notice that they have gone from listing median/average SFH pricing to benchmark or the new term that's now floating around, the MLS Home Price Index, which is just the benchmark.

That is not what houses are selling for...in fact, on average, it's already down 12-15%.

The west side is even worse. A few Point Grey homes have already started to slash their prices. One SFH was listed @ 3.2 million last month. It's now @ 2.4 and still no bites.

[drunkrussian]

there should be a "official vancouver housing prices" thread. thoughts?

[NNT]

We see this type of report/prediction every now and then in the past 10 years but it never really happened.
Problem is in Vancouver people wont drop the price even the house didn't sell. Downtown condo price had been stable for the last 3 years but I didnt see any drop and some of the near by market is still going up like in Richmond.

[Gridlock]

What the article doesn't say:

...because interest rates will go up in the same time frame.

The entire stimulus process was not to stabilize the economy, it was to re-ignite the bubble. It worked in Van...your shitshow house is still worth a fortune. I'm looking right now at a house for sale that has no land, no trees, is ugly as fuck and its squeezed in next to an apartment building.

Can't find it on MLS right now, but the last time we looked it was about 475? Sounds reasonable for such a unique fixer-upper.

[ae101]

i only believe it when evil honger real estate company stop build over prices house so that rich mainlanders comes & buy with that money period

not all asians are rich in canada

but seriously im in the market for small house soon as my dad & i work in china now but we still have family there & they dun drive so this pretty much force us to buy a house in richmond, so im SERIOUSLY HOPING housing would drop

im praying to god, buddha, allah & t-bow thats it happens soon

[too_slow]

Originally Posted by AWDTurboLuvr

You should see the amount of vacant condos that are in Toronto right now, 15,500 NEW condos sitting vacant and unsold...ridiculous. Oh and they're still building.

I am pretty sure that this applies to the False Creek area alone. I would love to see some vacancy stats around that area. I bike/run around that area a lot, and I see at least 8 condos going up concurrently...

Let the prices (and quality) free-fall!!

[melloman]

Hope this is true.. I'll be looking to purchase in 2-3 years.

[jackmeister]

god damn, just impose the foreign ownership ban with immediate effect.

[Gumby]

Real estate prices are puzzling... I've been looking to buy since April in Vancouver, west of Main. Some properties have been on the market for months, and they've dropped their prices over time, and still no buyer.

Other properties were priced lower than assessed value, with the intention of getting bidding wars. Well, the owners were presented with multiple "higher than asking" offers, but not high enough. So they re-listed at a higher asking price, and now they sit unsold.

I ended up buying a old house, to knock down & build new.

[Manic!]

Originally Posted by jackmeister

god damn, just impose the foreign ownership ban with immediate effect.

And what about people getting ready to sell there house and retire. Maybe foreigners shouldn't be aloud to buy any property in Canada. Force companies like Honda to close all there factories.

[JSS]

My dad and I build a couple houses on the side every year and were starting to notice a definite decline in how fast homes around here are selling. (east burnaby)

a trend ive noticed personally is that building lots are selling fast and for more than asking, there was one listed we were looking at 2 weeks ago, really nice sized lot for this area 51 x 179 listed at 729,900... i called our realtor and upon looking it up he informed that it sold the day after it was listed for 790k.

on the flip side, ive seen multiple homes that are 10 years or newer in the same area dropping prices, general price around here for the above mentioned "newer" home is between 1.2 - 1.6 million, and a majority that ive seen listed for more than a month are dropping their prices to 1.1 - 1.4.

now with all that being said, with the rate these building lots are selling and the slower rate the newer houses are selling theres definitely gonna be a bigger supply than demand in this area come the near future.
so the article isnt far fetched, from what ive noticed personally its already starting to happen where we do all of our buying and selling... mind you we only deal with this area so i cant speak for the rest of vancouver.

IMO its about time.

[Liquid_o2]

Originally Posted by AWDTurboLuvr

You should see the amount of vacant condos that are in Toronto right now, 15,500 NEW condos sitting vacant and unsold...ridiculous. Oh and they're still building.

Link to this statistic?

[mmmk]

Originally Posted by TRDood

I will believe it when I see it.

Ditto. If anything, prices will stop rising...I doubt they'll drop 15%+