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Blog by Kevin Wong

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Home Prices In B.C. To Rise 13 Per Cent This Year: Report

B.C. home prices will rise an average 13 per cent to $571,000 this year before edging back 2.5 per cent to $557,000 in 2012, the B.C. Real Estate Association said in its second quarter housing forecast released Thursday.

The BCREA also predicted a moderate increase in housing sales this year and next.

However, the 13-per-cent increase in housing costs this year is misleading, according to BCREA chief economist Cameron Muir.

“The average price in the province is being skewed very high because of a higher proportion of single-detached homes selling in the pricier markets of Vancouver,” Muir said in an interview. “This is at a time when sales are a bit below the 10-year average. My expectation is for quite flat prices going forward.”

Muir said that the average price in the Greater Vancouver area rose 26 per cent in May compared to May 2010, but that the benchmark price – the price of a typical home in the region – rose only about five per cent over the same period.

“This is a recent phenomenon,” Muir said of the discrepancy between the two price measurements. “The average price used to track the benchmark price pretty well.”

According to the report, after declining 12 per cent in 2010, residential unit sales through the multiple listing service are forecast to rise five per cent in B.C. to 78,200 units in 2011 and a further three per cent to 80,700 units in 2012.

However, the report also said that home sales will remain below their 10-year average of 87,600 units both this year and next.

“Home sales will post some modest gains over the next two years,” Muir said. “However, positive housing fundamentals like job growth, rising wages and an expanding population base will be somewhat offset by higher borrowing costs over the next eighteen months.”

He said a record 106,300 residential sales were recorded in 2005.

For Greater Vancouver, the report noted that sales — after declining 14 per cent to 31,144 units in 2010 — are forecast to rise 8.5 per cent to 33,800 units this year.

It said that total housing starts in Vancouver are forecast to increase 6.5 per cent to 16,200 units in 2011 and another two per cent to 16,550 in 2012.

The average price in the Vancouver area is forecast to rise 17.6 per cent in 2011 to $795,000 and then drop three per cent in 2012 to $770,000.

Muir noted that the average price in the south Okanagan is forecast to drop five per cent in 2011 to $304,000, the same percentage drop as the Kootenay region, where the average price is forecast to drop to $260,000.