Sagging demand from home buyers is putting downward pressure on Lower Mainland real estate prices, but mainly in areas where prices had shot up faster than the rest of the region.
September home sales in Metro Vancouver were down eight per cent from August and have plunged 32.5 per cent from a year ago, according to the Real Estate Board of Greater Vancouver (REBGV).
And a composite benchmark price that tracks all residential property movement in the area is down 2.3 per cent in the past three months, or down 0.8 per cent from a year ago.
That decline has been a more modest 1.8 per cent over three months and 0.1 per cent from a year ago over the entire Lower Mainland – which includes the Fraser Valley, where values have held up better.
“In some areas and neighbourhoods we’re seeing price declines, especially in the areas that ran up the most,” said Tsur Somerville, director of UBC’s Centre for Urban Economics and Real Estate at the Sauder School of Business.
“There is a noticeable difference between this West Vancouver-Vancouver west side-Richmond grouping and everywhere else,” he said.
Prices in the three oceanfront cities that had soared in 2010 and 2011 have dropped five to seven per cent from their recent peaks, he noted.
The priciest district remains Vancouver’s west side, where benchmark detached houses typically cost close to $2.1 million. That’s down 6.5 per cent from a year ago but still up almost 40 per cent over the past five years.
It’s a completely different story in Maple Ridge, where a detached house typically changes hands at $468,000 – the same price as five years ago and up just over one per cent from a year ago.
The Fraser Valley Real Estate Board, which also covers Surrey, White Rock and North Delta, said residential property as a whole declined 0.4 per cent in the past three months, but is up 2.1 per cent year-over-year.
Detached houses are up three per cent from a year ago at $549,000 while townhouses are down 1.7 per cent to $305,700 and apartments have gained 4.1 per cent to $198,800.
“The Fraser Valley is much more stable than other areas of the Lower Mainland,” Somerville said.
Demand for higher end homes has fallen off the fastest in both Metro Vancouver and the Valley.
Greater Vancouver real estate board president Eugen Klein said Ottawa’s elimination of 30-year government-insured mortgages earlier this year has led to a “clear reduction in buyer demand” because the measure intended to rein in Canadian debt loads has made homes less affordable here.
But Somerville doesn’t think the federal government’s tightening of mortgage rules is playing a major role.
“That only applies on mortgages with a down payment of 25 per cent or less,” he said. “Nobody’s out buying a high-end home with a three per cent down payment.”
Somerville said a slowdown in Lower Mainland residential market demand has been underway since last December and is being matched by flattening prices.
He doesn’t detect anything likely to trigger a much deeper drop in the market.
“To have some dramatic radical change you need to have something dramatically and radically change and I don’t see what that is.”
Market psychology is also playing a role and a recent survey found many Metro residents think prices will continue down, a belief that could extend the trend if many would-be buyers decide to keep waiting.