Housing bubble fears just hot air: Economist
Helmut Pastrick has heard the growing talk from other financial analysts that a real estate bubble or "craze" in Vancouver has left the condo market ripe for a crash.
So far, he doesn't see it.
The Central 1 Credit Union chief economist instead says prices aren't soaring dramatically and he expects continued stability over the short term in the Lower Mainland.
"The Vancouver market is still obviously very expensive," Pastrick said. "But it's not skyrocketing away from us. Nor is it likely to fall into the tank either."
Lower Mainland home sales were down in April, but most prices are up modestly from a year ago, although some categories have sagged in recent months.
Nor does he see signs that builders are flooding the market with new units.
The risk as Pastrick sees it is not from over-inflated prices, but from global events – a new financial crisis in Europe or a war that sends oil prices spiking.
He said that could spark a new recession that drags down both real estate and stock markets.
"If there's a global event, Canada will also feel it and the housing market will as well," he said, adding detached houses would fare better than condos.
Over the longer term, Pastrick doesn't expect Metro Vancouver will suddenly become a more affordable place to own a home.
"When I look over the next 25 years, I expect prices will be higher," he said.
"I expect it will be even more difficult for many to enter the housing market."
The proportion of people who rent instead of own will rise over time, he predicted, and builders will continue the trend of offering smaller units.
He also foresees more intergenerational households than in the past with larger extended families living under the same roof.
The Real Estate Board of Greater Vancouver's benchmark price for all residential homes was up 2.8 per cent in the last three months to $683,000 in April, and is up 3.7 per cent from a year ago.
Detached house prices have been the strongest, up 6.3 per cent from a year ago, while condos were up just 1.1 per cent.
Townhouses were up 1.9 per cent from a year ago to $318,400 and condos rose 0.8 per cent to $205,800.
The federal government, wary that low interest rates important for economic recovery are leading consumers to take on too much debt and inflate home prices, has tightened mortgage lending rules a number of times since the 2009 recession.
Metro Vancouver home starts held steady in April and are up 16 per cent from a year ago to nearly 6,000.
Total building permits issued in the Lower Mainland were up nine per cent in March from the same period a year ago. That includes industrial and office construction.