Modest decline in house prices predicted for next few years

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VANCOUVER (NEWS1130) – A modest decline in Vancouver home prices is predicted in the next few years, according to an economist.

Robert Hogue with Royal Bank expects a price drop, in the medium term, of seven per cent to 12 per cent by 2014 or 2015, with “few signs of imbalance between supply and demand” in the Vancouver market.

He says there factors that would mitigate an eventual increase in interest rates. “The job market will still be fairly positive, the demographics of Vancouver are still quite supportive of the housing market.”

Hogue adds there’s been a surge in new condos hitting the market since 2010.  “We see a little bit of risk on that front but we’re not overly concerned that this, in and of itself, would trigger a market reaction.”

He explains that Vancouver’s “strong gains in property values from 2009 to 2011 were overstated” by sales of high-end homes in some areas.

He says the local market will continue to be supported by the economy and immigration.

On the other hand, Hogue warns the market is under substantial stress and vulnerable to a bigger correction if interest rates rise sharply or if there is a fairly significant pullback of wealthy buyers targeting the high end.

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