A market shift = a shift in expectationsMarket conditions have shifted. After five years of blockbuster activity and double-digit price growth, market conditions have slowed, and now favour buyers in many areas of the province.
Residential sales have declined 22 per cent in the first six months of this year, while available resale inventory has grown by 54 per cent to 57,000 active listings in June. In the Greater Vancouver board area, where longer-term data is available, inventory is at the highest level since 1998.
Home price appreciation observed from 2004 to 2007 is less attainable in today’s market, and sellers’ expectations for such gains should be tempered. More generally, in a market favouring buyers, prices generally increase at or below the level of inflation. While the average residential home price in BC increased at a healthy 6 per cent per year since 1981, large gains are often followed by periods of price stagnation. Over-optimistic pricing by sellers will only inhibit the timely sale of properties, adding to inventory levels.
Buyers have more homes to choose from now than in previous years, resulting in greater freedom to compare the attributes and prices of similar properties in the market before making purchase decisions.
Despite current buyers' market conditions fuelled by housing affordability constraints and economic uncertainty, the economic and demographic backdrop in support of housing demand remains strong in BC. BC's unemployment rate remains near record lows, while the labour force participation rate hovers near historical highs. Meanwhile, the province remains a favoured destination for new migrants, reflected in the third-highest population growth among provinces during the first quarter of 2008. However, challenges continue in the forestry sector, and eroded consumer confidence may also be playing a role in a pull back of consumer spending.