Thats according to UBC Sauder School of Business professor Tsur Somerville. Its not just the Vancouver housing market that’s taking a dive – all across Canada things are slowing down, listings are high and many markets are seeing price drops. Calgary and Vancouver have seen some of the largest price drops, but Toronto also saw a 1 percent price drop in August for the first time in ten years.
“The boom in the housing markets is definitely over,” Tsur Somerville, a professor in the Sauder School of Business at University of British Columbia said in an interview. “Depending on where you live, you can likely expect prices to fall further.”
Somerville, in a study released this month, looking at the relationship between house price and rents estimates that housing prices in some Canadian cities such as Regina, Winnipeg, Ottawa and Montreal, would have to drop as much as 20 per cent to be in balance. The professor found only Toronto and Edmonton house prices were not overvalued in the first half of 2008.
Put another way, average Vancouver house prices would have to fall by $85,000, in Winnipeg it would be $74,000 and Ottawa $81,000.
Just because homes are overpriced doesn’t mean the market will plunge to equilibrium, Tsur said.
Toronto housing prices are not out of line because they have not had the explosive growth of other cities, Sommerville said. “Some cities look way out of line when you run the numbers, but Toronto is bang on.”
Sommerville cautioned that the study was based on existing detached home prices and rents and did not include condo stocks.
I wonder what that study would show if you included data from the price/rent ratio of condo stocks.. We do have quite a few condos in this fair city of ours, with thousands more currently under construction.