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Vancouver is a drag on Canadian real estate, says Canadian Real Estate Association

Vancouver is a drag on Canadian real estate, says Canadian Real Estate Association

 

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Vancouver is engulfed in fog on a winter's day in 2011. Photo by Wayne Leidenfrost, PNG

Vancouver is a drag on Canadian home sales.

That’s the conclusion of the Canadian Real Estate Association (CREA), which stated in a report released on May 15, 2012 that Canada’s home sales edged higher in April, but that Vancouver’s market was a drag on the overall increase.

That’s a surprising conclusion given the mounds of complaints that Canadians have about the insanely high housing prices on the West Coast. But according to the CREA, housing prices in Vancouver are well off peak levels from the same time last year.

 Vancouver is a drag on Canadian real estate, says Canadian Real Estate Association

A graphic included with the report shows the average home price in Vancouver experienced a 10 per cent drop in April, compared with an approximately 20 per cent increase in April 2011. By contrast, Canada’s housing prices showed an increase of 0.8 per cent from March to April 2012, compared with about a seven per cent increase in April 2011.

Vancouver was, according to the CREA, one of the reasons why Canada’s overall housing price increase didn’t show up higher.

From the study:

“Netting Vancouver out of the national average price calculation yields a 4.9 per cent year-on-year gain,” says Gregory Klump, the CREA’s chief economist. “Netting Toronto out of the national average price calculation, while leaving Vancouver in, produces a 2.2 per cent year-on-year decline. Netting out both Vancouver and Toronto results in a 3.1 per cent increase in average price. On balance, this points to modest price growth amid balanced market conditions in much of the rest of Canada.”

Toronto, in the meantime, is proving to be a boost to Canada’s real estate fortunes. The average price increase stood at around eight per cent in April 2012, about the same as the year prior.

So why is Vancouver being such a drag?

Andrew Hasman, a Vancouver real estate agent who specializes in luxury homes, tells the Globe and Mail there are two reasons why this may be happening: first, the number of buyers from China is down this year; second, Canadian banks have tightened up their mortgage lending rules, particularly on high-priced real estate.

 Vancouver is a drag on Canadian real estate, says Canadian Real Estate Association

Of course the trend should not be extrapolated to mean that the prices are becoming affordable. The MLS Home Price Index shows that the average price of a single-family home in Vancouver’s Lower Mainland in March 2012 was $865,400. Compare that against $520,600 for a single-family home in Greater Toronto and $419,900 in Calgary and you’re still dealing with the highest prices in the country, according to the MLS.

The price of an apartment tells a similar story. The average price for a Lower Mainland apartment was $348,100 in March 2012, compared to $305,900 in Greater Toronto and $246,600 in Calgary.

So while the numbers may be optimistic as far as housing prices becoming more affordable, it’s important to remember that this is just for now. And in Vancouver’s case, they’re going from insanely expensive to not-quite-as-expensive.

See here one of the homes you could never afford to buy in Vancouver.

SOURCE:Photos by Screengrab, CREA website; Ian Lindsay, Vancouver Sun