B.C. house prices to plummet 13 per cent: forecast
Derek Penner, Vancouver Sun - British Columbia is tipping into a recession that will see average house prices fall by 13 per cent in 2009, rather than the nine per cent initially forecast, the B.C. Real Estate Association reported Monday.
Association chief economist Cameron Muir, in his forecast updated from last fall, foresees average prices falling to $396,600 in 2009, with overall sales declining to "levels we haven't seen since the mid-1980s."
Housing sales, according to the BCREA forecast, will decline nine per cent from 2008 levels to 62,650 sales in 2009 before bouncing back to 68,923 units in 2010.
Housing starts, Muir is forecasting, will plummet 45 per cent in 2009 to 19,000 units, with some possibility of recovery after 2010 as inventories of unsold homes shrink.
In the fall, Muir had forecast a nine-per-cent decrease in prices in 2009, but "that was before the financial meltdown and a significantly larger correction in equity markets," he said in an interview.
"As well, we've seen the economy weaken and expect now the economy in B.C. will slip into a recession this year following Canada and the U.S."
Muir predicts that B.C.'s recession "is going to be a bit more shallow, but it's going to be a recession nonetheless," and that is taking a toll on households, particularly potential homebuyers who are watching their net worths decline with shrinking property values.
However, the BCREA forecast depends on the overall economy shrinking by only half a percentage point in 2009. Other private-sector forecasts have estimated the contraction will be larger.
Central 1 Credit Union is forecasting the contraction of B.C.'s economy will be about one percentage point from 2008.
In December, Benjamin Tal, a senior economist with CIBC World Markets, told a gathering of mortgage brokers that since Canada's recession was triggered by the meltdown in the U.S. housing market, Canada won't begin climbing out of it until American real estate bottoms out and starts to recover.
The beginning of that recovery, he said, might not come until the middle of 2010.
In the BCREA forecast, Metro Vancouver is expected to see the second steepest drop in home prices in the province with an average price of $508,000 in 2009, down 14 per cent from 2008. Sales in the region are expected to decline 10 per cent over the year to 22,700 units, the forecast says.
The Kootenays should see the steepest decline in prices during 2009, some 15 per cent to $244,000, with unit sales down 10 per cent to 2,040.
Victoria average prices should decline 10 per cent to $435,000 in 2009, with unit sales to fall eight per cent to 5,680. Vancouver Island average prices should decline 12 per cent to $290,000 in 2009 with unit sales falling nine per cent to 6,200 sales.
"At this point, we don't see any miracle recovery in the housing market," Muir said, but he does see prices stabilizing in 2010, with a modest recovery in sales.
That recovery, he said, will be underpinned by factors such as government stimulus packages and increased consumer confidence as house prices become more affordable while mortgage rates remain low.
Muir expects that if his economic projections hold up, inventories of unsold new homes will shrink, triggering a rebound in new-home building after 2010.
If home sales and new-home starts increase through 2011 and 2012, Muir said, that should mean "prices not only stabilize but edge up again if we look over the next five years."
By Derrick Penner, Vancouver Sun