Metro Vancouver housing market for 2010

February 25, 2010

Current metro Vancouver market activities

Lower construction costs from mid 2008 contributed to the developers’ ability to offer new homes at prices sometimes at a slight discount to comparable resale product in the area. The attractive pricing levels, and lack of competition in the market have all contributed to the rapid rate of sales during the second half of 2009.

Housing market for 2010 and beyond

The developers that have started construction in 2009 are experienced and well capitalized groups that can take advantage of current demand for new homes. Other less experienced developers will find it difficult to obtain financing for their projects due to higher requirements by lenders.

The restriction of available financing will prevent an oversupply of new multi-family condos and townhouses. Developers that are able to bring product to market in desirable locations, will benefit from limited competition both on the presale and tight resale markets.

Impact of HST on housing demand

With the Harmonized Sales Tax, set to start July 1, and the Bank of Canada’s anticipated rate hike, sales surge can be expected during the spring of 2010. The sale pace could slow dramatically in the second half of 2010. The announcement by Finance Minister Jim Flaherty that starting April 19, all borrowers with less than 20% down payment must be qualified based on standards for a five-year fixed-rate mortgage.

The expected increase in supply of resale homes, and reduced demand projected for the second half of 2010 may bring about a more balanced housing market. Moderate increase in the supply of new condos as cited above will help to sustain the current price level.

However, if buyers are holding off their purchases due to high prices, some sellers may cut their prices to sell their homes. A price decline may only happen when there are over 6 months supply of homes. At this time, at under 3 months supply, sellers are not under pressure to cut their prices.

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