BC housing woes as prices set to soar.....Credit Union warns

They are not on the endangered species list yet, but first-time home buyers are disappearing in urban B.C., victims of unprecedented growth in real-estate prices.

Yesterday the news got worse for those still hoping to get into the market.

The latest forecast from Credit Union Central of B.C. expects housing prices to once again reach new highs this year and next. Victoria and Vancouver, already the most unaffordable cities in the country, will likely face average price increases of 10 to 12 per cent this year.

Flora Stanley groaned at the news.

Ms. Stanley and her husband returned to her hometown, Victoria, to raise a family three years ago, but discovered they couldn't get back into the market.

They're both working but are living with her mother to save for a down payment. With their second child on the way, the couple had hoped for a break in housing prices soon. The average price of a single family home in Greater Victoria is approaching $600,000.

"If I had a time machine, all I would do is go back and buy a house," she said.

Helmut Pastrick, chief economist for the credit union, said poor affordability for first-time buyers is the biggest restraint on the market right now.

"Certainly for low-equity, first-time buyers it's exceedingly difficult and I don't expect any improvement this year," he said yesterday.

"Prices are rising faster than income."

He noted that in 2001, first-time buyers made up about 30 per cent of purchasers. Last year, they made up 15 per cent of all real-estate sales in B.C., and that figure is still dropping.

"I don't think I've sold to a first-time buyer since - I can't remember," Victoria realtor Chris Markham said yesterday. He has just sold a building lot in Victoria for over $3-million to a client from Calgary.

"And as we are talking, my pager is going off from another client in Calgary - this is what is driving us right now."

Mr. Pastrick noted that the growth is uneven. Prices are rising mostly in B.C.'s urban centres, which have been remarkably insulated from the economic downturn in the United States. Lower mortgage rates, rising incomes and increasing in-migration are fuelling the market in the cities, while forest-dependent towns in rural B.C. are weakening.

He does see some signs of softening, however. Prices aren't likely to continue to increase at the same rate. Last year, real-estate prices in B.C. rose by about 13 per cent; Mr. Pastrick expects the increase next year to be around 5 per cent.

Last week, a report from Royal Bank of Canada warned that housing affordability across the country has dropped to its lowest level since the country slid into a recession in 1990.

But it singled out Vancouver and Victoria, where the cost of a mortgage on a basic home consumes at least half of an average, pre-tax household income.

For Ms. Stanley and her family, it likely means giving up on their plans to buy in the city.

"We're going to have to look at moving up-island, but even that's expensive," Ms. Stanley said. "You really have to look at your priorities - do you want to be so cash-strapped you can't go on vacation? It's discouraging."

(prepared by Justine Hunter/Globe and Mail)