Vancouver's housing market is a bubble that is about to deflate. The Vancouver housing bubble is a myth and average home prices will continue to increase in 2012.
Those are the dueling counterpoints from increasingly bearish lenders and bulllish real estate executives as they forecast the future for Canada's traditionally hottest housing market.
CIBC chief executive officer Gerry McCaughey recently joined analysts at the Royal Bank of Canada and Bank of Montreal in warning that Canada's housing market, and Vancouver in particular, is poised for a downturn this year. McCaughey warned that the condominium sector in both Vancouver and Toronto "might be peaking" due to overbuilding and over evaluation.
“When you look at markets like Vancouver and Toronto, there is a level of caution from a risk perspective that is higher today than it would have been a few years ago,” agreed RBC CEO Gordon Nixon.
Western Investor also found anecdotal evidence on the streets of Vancouver that condomium sales and prices hikes have cooled in recent weeks. "We are seeing more price changes, all downward," one East Vancouver realtor confided.
But Royal Lepage Real Estate Services, in a housing outlook study released this week, is much more bullish. The company is forecasting a 2.3 per cent increase in average prices this year following a surprising stellar 2011. Last year, the company notes, the average price of a Vancouver bungalow increased 14.1 per cent to just over $1 million and the average condominium price was up 10 per cent from 2010 to $536,500.
“Investment from Asia continued to add to demand for real estate in Canada’s most expensive market,” said Bill Binnie, broker and owner of Royal LePage North Shore. Binnie also noted that low interest rates drove demand for Vancouver homes. “While we anticipate some slowing of the market this year, we believe calls for a price correction – particularly in the condo market – are unfounded,” he said.
“In the recovery period following the 2008-2009 recession, I found myself repeatedly speaking of ‘irrational exuberance’ in the Canadian housing market,” added Phil Soper, president and chief executive of Royal LePage Real Estate Services. “Expectations were too high and the pace of expansion unsustainable. With this report, I find myself in exactly the opposite position. Widespread calls for a major real estate correction in 2012 simply can’t be justified. The industry has significant momentum entering the year, and is buoyed by the stimulative effect of very low interest rates; we expect the market to continue to expand – albeit at a slower pace.”
