Weak demand for housing predicted

Okanagan real estate has been identified as a “weak link” in B.C.'s economy.

Okanagan real estate has been identified as a “weak link” by Central 1 Credit Union, in its latest report, titled B.C. Housing Forecast 2011-2013.

“Housing markets in the Okanagan, the Kootenays and part of Vancouver Island will continue to see weak demand in 2011 as mortgage rates rise and buyers remain hesitant to make discretionary and luxury purchases,” reads the report.

“In addition, a high Canadian dollar and low prices south of the border will draw demand away from B.C. markets. With demand and supply conditions already favourable to buyers at the current time, a downward trend in price levels is expected to persist into 2011.”

This year the median annual price in the Thompson-Okanagan is forecast to decline six per cent while Kootenays prices are forecast to decline five per cent.

Lower price levels and a return to discretionary spending on the part of retirees and recreational buyers are expected to boost demand in 2012 and 2013, and housing sales in the Thompson-Okanagan region are forecast to rise eight per cent in 2012 while the Kootenays will see 10 per cent growth.

Both markets are forecast to record more than 20 per cent gains in sales in 2013.

On the heels of the Central 1 report, the Okanagan Mainline Real Estate Board reported February 2011 sales activity of all MLS property types improved over last month but were down from sales reported at this time last year.

It was chalked up to the fact buyer interest “was curtailed by poor weather conditions.”

With new listings up from January and overall inventory remaining similar to February 2010, a good selection of properties continues for buyers.

While active listings and inventory paralleled February 2010 numbers with 4,506 units compared to 4,401 last year, the 1,016 new listings taken fell by 7.21 per cent over last year but rose 18.27 per cent from January’s 859.

Compared to last February, overall unit sales and total sales volumes dropped 24.84 per cent, from to 233 from 310—totaling $90.12 million compared to $121.44 million in 2010. Total residential units sold declined 19.12 per cent, to 220 from 272 in 2010 but climbed 15.18 per cent from January to 191.

“As the B.C. housing market returns to normalcy after two years of volatility, the Okanagan will move from a buyers’ market towards more balanced conditions and price stability. Improved economic conditions, population and employment growth should boost consumer demand and fuel sales during the coming months,” said Brenda Moshansky, OMREB president and realtor.

“Moving into spring, we can expect to see more sellers listing their homes, and potential buyers locking into low mortgage rates and closing deals before lending and refinancing criteria tighten. Excellent property choice and attractive home prices in the Central Okanagan will continue to provide great opportunities for buyers—especially while the Lower Mainland market remains heated and prices inflated.”

Central 1 forecasted that B.C. sales will increase by seven per cent increase this year, and the median house price will hit a new record of $402,000.

Total home sales will rise to 95,500 units, rebounding from a 10.5 per cent drop in 2010 as both resale and new home sales will increase. Sales will increase another two per cent in 2012 and a healthy 15 per cent in 2013.

“Even after those gains, sales will be below the levels we saw from 2002 to 2007,” said Central 1 economist Bryan Yu. “Low, but rising, interest rates and tighter mortgage insurance rules will restrict sales for the next few years.”

This year, sales will be stronger in the first few months as buyers move to beat the tougher mortgage insurance rules that take effect on March 18. “Metro Vancouver will observe the strongest uptick in early-year activity, given the higher proportion of local buyers and higher prices in those areas,” added Yu.

During the three-year forecast period, home sales are expected to be strongest in the Metro Vancouver area and in Northern B.C. Despite tightened mortgage insurance rules and modest increases in mortgage rates, stable levels of net in-migration and improved economic conditions will bolster sales in Metro Vancouver. The economy in the north will continue to benefit from strong commodity markets and trade-related activity, which will keep housing activity on an upward trend through the forecast horizon.

This year, posted five-year fixed-term mortgage rates will range from an average of 5.4 per cent in the first quarter to 5.9 per cent in the fourth quarter. The average rate is projected to rise to 6.65 per cent in the fourth quarter of 2012.

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