B.C.’s hot real estate sector has cooled slightly, but industry officials are confident it will resume its red-hot streak next year.

Average house prices in Greater Vancouver in 2005 are forecast to hit $406,000, an increase of eight per cent, compared to an estimated average price of almost $376,000 this year. That represents a 14-per-cent hike over 2003, according to a Re/Max Canada national survey.

“Next year’s projected price increase for Greater Vancouver will once again make it one of the hottest markets in the country,” says Elton Ash, regional director of Re/Max Western Canada in Kelowna.

All sectors of the real estate market showed significant price increases, despite levelling off in the latter part of this year.

Wayne Chose, Business Edge
Bob Rennie has been involved in many projects in Vancouver’s downtown condominium market, which is taking a breather after a torrid start to 2004.

“At the height of the market people selling were seeing weekly price hikes . . . that no longer is the case,” says realtor Bob Rennie of Rennie and Associates Realty.

“There is no doubt about it, the market for condominiums has taken a breather. The hot market we had in the beginning of the year could not be sustained for the remainder of the year.”

Rennie is often called Vancouver’s condo king because of the huge number of condos his company has sold in the last few years.

“In the first six months of this year you had investors who were snapping up condos in downtown Vancouver and first-time buyers and homeowners. Now, it is basically homeowners who are in the market,” adds Rennie.

Jason Upton, a real estate appraiser for the last 11 years, agrees.

“The volumes of sales in the Vancouver west side has dropped considerably since the spring of this year,” says Upton, of Sutton Realty.

“However, the number of new listings also has dropped. Overall it is quieter, but as supply and demand are in balance, prices have remained stable.”

But not everyone shares the optimism of Re/Max’s Ash. “House prices likely will rise by four per cent next year,” predicts Helmut Pastrick, chief economist of the Credit Union Central of British Columbia.

“Sales have tapered off in the marketplace and there has been an increase in listings and new construction – all of which adds up to an easing of prices. For the month of September and October, prices have come down. We’ve hit a bit of a soft patch,” says Pastrick.

However, “we will begin to see sales volume pick up again likely in December,” he adds. “It’s a close call whether next year’s sales will be as high as what is projected for this year. In the past year, we have had the hottest housing market in B.C.”

But Ash is confident of the figures published in the national study by Re/Max.

“Last year, we had the same comment from a number of people who said we were too bullish in our analysis. But we were proven correct,” Ash says.

“Consumer confidence in B.C. is strong and the economy is strong and that adds up to being good news for the real estate sector.”

“What we’re seeing is a stable market,” says Andrew Peck, president of the Real Estate Board of Greater Vancouver, in a statement.

“There is a good balance between home buyers and sellers that has resulted in less pressure on home prices.”

But in its monthly report for October, sales are down substantially by 27.4 per cent when compared with sales for all detached, attached and apartment properties for the same period last year. The same holds true for housing starts for October.

Canada Mortgage and Housing Corp. (CMHC) noted in a report that housing starts dropped 42 per cent to 1,151 units, compared to October of 2003.

However, “the Vancouver housing market is now being bolstered by solid economic and demographic fundamentals,” said CMHC senior market analyst Cameron Muir in a statement.

“Increasing migrants from other provinces, rising full-time employment and improving export markets will help keep Vancouver’s housing market buoyant through 2005.”

Real estate is a big economic driver in B.C. Last year, the industry generated a record dollar volume of $24 billion and an additional $1.8 billion in economic spinoffs, according to the board.

Like Rennie, Upton predicts the market will come back.

“In fact, in the last couple of months, there has been evidence that sales are actually surpassing new listings, which, if continued, would cause prices to climb again,” Upton says.

Rennie’s company, which specializes in selling new condos, will have $1 billion in condo inventory for the next 21/2 years.

But even though condo sales have slowed down, the company sold most of the condo units in the $350-million Shangri-La commercial-hotel-residential complex in only six weeks for a total value of $240 million.

The average sale price was slightly more than $1 million. The 60-storey complex, the tallest in Vancouver, is slated to open in 2008. Twenty-two units were still for sale as of last week.

Rennie’s biggest day was at the peak of the condo market earlier this year. People had lined up overnight at one development. By the end of the day, $124 million worth of condos had been sold.

Rennie is confident the market will return to its former glory, noting that over the next few years British Columbia’s economy has $4 billion worth of construction projects earmarked.

“I look at job creation, and with that kind of capital investment we will have a strong economy and a lot of new jobs will be created and that will drive the market in conjunction with the historic low interest rates. Even if rates go up by one percentage point, it won’t really have an impact.”

But while Vancouver’s real estate market will become hot again, it is Edmonton that will show the biggest price increase in Canada, according to the Re/Max study.

Ash says his company projects a hike of 12 per cent, compared with an eight-per-cent increase this year, and Calgary will show five-per-cent growth, as it did this year.

“Calgary is soft because there is a lack of available land, a shortage of labour and higher construction costs.”

(George Froehlich can be reached at george@businessedge.ca)