VANCOUVER (NEWS1130) – Even in Vancouver’s overpriced real estate market, renters are not saving money.
A new report says homes in Metro Vancouver are overpriced by about 26 per cent.
“One thing that I find striking, though is that [with] current interest rates prices, make some sense, when compared to rents,” says Tsur Sommerville with UBC’s Sauder School of Business.
He says the comparison between your current rent and what your mortgage would be is a very important metric when deciding whether to buy a home.
Relief might be on the way; the Fitch report says Vancouver’s overvalued real estate could correct by up to 15 per cent “over the next several years.”
“A lot depends on where interest rates go over the next few years,” explains Sommerville. “[If] interest rates three, four, five years from now are substantially higher than what they are now then housing prices will correct.”
Sommerville adds local home values could drop even more than the 15 per cent predicted by Fitch.
“If there was to be a correction, you might expect to see a bigger correction in house prices than in condos,” he explains.
“It’s the land. Land is a bigger component of the value of a detatched house than it is in an individual condo unit.”
Sommerville says large changes in real estate prices tend to be reflections of land value, not of the home itself.