The Province: Andrey Pavlov on Vancouver’s housing market

Jul 06, 2012

The following article was published by The Province on July 4, 2012.

It’s a buyer’s market, but no drop in prices yet

Home sales have hit their lowest levels in more than a decade, but so far prices haven’t fallen. That could change if sellers become desperate to unload their properties.

It may be a buyers’ market but that doesn’t mean cheaper homes. Potential homeowners can, however, breathe a little easier.

While Vancouver home sales have hit their lowest level in more than a decade this June — falling 17.2 per cent from May and tilting the market in favour of buyers — prices have remained firm in what was once the country’s hottest real estate market.

The Real Estate Board of Greater Vancouver reported 2,362 sales in June, which is a decline from 2,853 in May and also off 27.6 per cent from a year earlier when there were 3,262 sales.

However, despite declining sales, the housing price index for residential properties in Vancouver was still up 1.7 per cent from a year ago.

“Overall conditions have trended in favour of buyers in our marketplace in recent months,” board president Eugen Klein said. “This means buyers are facing less competition and have more selection to choose from compared to earlier in the year.”

According to associate broker Tony Ioannou of Dexter Associates Realty, that leaves more room for buyers to shop around rather than race to submit offers.

“This market has suddenly empowered buyers to get what they want in an offer,” said the broker, noting sellers no longer have the same number of offers to choose from now that sales have slowed.

“In general, it’s more balanced. Sellers now have to be a bit more realistic and buyers can be a bit more aggressive.”

University of B.C. housing expert Tsur Somerville echoed that sentiment but noted it may not translate to cheaper homes just yet.

“Sellers tend to be very reluctant to lower prices so the fact that sales are slowing doesn’t mean sellers are all going to cut their prices but it does mean that buyers’ ability to negotiate is enhanced,” he said. “What it really removes from buyers is the pressure.

“It’s not that they have more selection, per se — you’re just not all of the sudden needing to fight tooth and nail with other buyers to put offers on a place right after you’ve seen it.”

According to the REBGV, June sales were the lowest total for the month in the region since 2000.

June sales of detached properties in Vancouver totalled 921, down from 1,471 in June 2011, while the price for detached properties increased 3.3 per cent from a year ago to $961,600.

Sales of apartments slipped 19 per cent to 1,026 in June from 1,266 a year ago. The benchmark price of an apartment increased 0.3 per cent from June 2011 to $376,200.

Meanwhile, there were 415 attached property sales in June, down from 525 a year ago, while the benchmark price decreased 0.1 per cent from a year ago to $468,400.

New listings for detached, attached and apartment properties in the Greater Vancouver region totalled 5,617 in June, down from 6,927 new listings in May and from 5,793 new properties a year ago.

The total number of residential property listings on the board’s MLS service was 18,493, up 3.27 per cent from May and up 22 per cent from this time last year.

Those numbers, along with declining sales seen in April and May, show signs of cooling in Vancouver’s housing market, notes Simon Fraser University finance professor Andrey Pavlov.

Pavlov said in a balanced market, the sales-to-active-listings ratio is normally closer to 50 per cent. According to the REBGV, Vancouver’s ratio is at 13 per cent, down from March when it was at 19 per cent, placing Vancouver at the lower end of a balanced market.

“It takes sellers a while to adjust,” Pavlov said, noting the market could very well see a drop in prices within six months if sellers become desperate to sell. “It’s slowly starting to happen but it won’t happen overnight because sellers are still thinking it’s temporary.”

The slowdown in sales comes ahead of changes by Ottawa to tighten mortgage lending in Canada.

Finance Minister Jim Flaherty moved last month to cool the red-hot condo markets in Toronto and Vancouver by tightening rules for borrowers, including cutting the maximum amortization period for government-insured mortgages to 25 years from 30.

As well, the federal regulator of financial institutions has told lenders they can only issue home equity loans up to a maximum of 65 per cent of the property’s value, down from the previous 80 per cent.

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