It looks like the ‘correction’ phase of the Canadian real estate market cycle is picking up steam and Vancouver is strapped to the front on the locomotive. Homeowners who relied on property values to boost their net worth are discovering that they’re suddenly poorer than they were a year ago:
When Pat Webb moved to Vancouver a year ago, she didn’t think twice about buying a condo in tony Kitsilano, among the hottest neighbourhoods in the city’s booming real estate market.
But in August, the 70-year-old retiree decided to move back to the United States. She had sensed Vancouver’s market was slowing, but a neighbour’s condo had sold a week earlier, so she too tried to sell.
She listed her one-bedroom, 705-square-foot condo for the price she paid – $509,000 – on Aug. 30. Ms. Webb has since reduced that to $485,000. It still hasn’t sold.
And condo owners in downtown Vancouver are predicted to suffer the most in coming years:
Condo owners in downtown Vancouver are at greater risk for price depreciation than single-family homeowners in the suburbs, a BMO Capital Markets economic analyst said Tuesday.
“Condo prices could drop faster because of overbuilding,” Robert Kavcic said in an interview. “When you have excess in the market, that pushes prices down.”
A BMO survey released Tuesday suggested B.C.’s housing starts have to fall by about 25 per cent from current levels to return the market to sustainable numbers.
For those wondering why people would hold on to an investment that by all measures is set to decline for years, you can blame denial, which can be an incredibly strong force. For an example of denial at work just look to the US where prices have been falling for two years and realtors still struggle to get the message to owners who believe that their property is different and is actually gaining value.