Housing correction 'has begun:' Greater Vancouver prices forecast to drop 8.5% in 2017
The drop is partly because home prices had gotten to high and partly due to buyers’ reaction to B.C.’s new foreign buyer tax, says Royal LePage
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Royal LePage is forecasting Greater Vancouver home prices to fall by 8.5 per cent in 2017 as buyers continue to grapple with a crisis of consumer confidence, according to the company’s CEO.
“In the fourth quarter in Vancouver we saw sharp year-over-year (price) increases,” said Phil Soper, adding that the real estate firm uses its own data to formulate forecasts.
“Prices actually fell at a greater rate than normal over the third and fourth quarters. The correction has begun.”
Metro Vancouver’s real estate market had reached unplumbed levels of runaway price growth by June 2016, when prices for detaches houses in some neighbourhoods had increased over 40 per cent year-over-year.
Soper concurs with other real estate industry insiders who say the market had begun to slow in April, in part because prices had simply become too unrealistic. From Soper’s point of view, the B.C. government’s introduction of a 15 per cent property transfer tax on foreign nationals was an unneeded government intervention in the market, which he believes would have slowed naturally without action.
Foreign buyers play a bigger role in Vancouver than in any other market in Canada, Soper said, but it’s still a relatively small percentage of overall sales.
But the tax did make an impact on buyers’ behaviour, who may have been assuming that, with the help of foreign buyers, prices would continue their meteoric rise.
“Consumer confidence in the region took a bit of a body blow,” Soper said.
Soper observed that while an 8.5 per cent price decrease would be a major price correction for a market like Montreal, it’s not as big a deal for Vancouver, which tend to correct and rebound faster and more often than other markets. Royal LePage expects the condo market, where prices haven’t fallen as dramatically as for detached homes, and B.C.’s relatively strong economy to offset further price decreases.
As for those potential buyers who are eyeing the market and considering taking advantage of lower prices, Soper advises people speak with their bank or financial adviser and really make sure they can afford the hefty purchase without compromising quality of life.