Real estate in 2009

Real estate markets in 2009 will be mired in the economic slowdown and their performance will depend on how government stimulus affects consumer confidence, the realty firm Re/Max said Wednesday.

In its 2009 outlook, Re/Max said the threat of global recession will weigh on markets, and estimated that half of the 22 major Canadian cities it surveys will see market declines, with B.C. markets seeing some of the steepest drops.

Elton Ash, Re/Max regional executive vice-president for Western Canada, said the beginning of 2009 will look a lot like the end of 2008.

“The confidence issue, certainly from our perspective, [will be key] when we look at 2009,” Ash said in an interview. “The first quarter of 2009 will certainly be a continuation of the trend we’re seeing now, with reduced transactions and average prices coming down in Vancouver and throughout British Columbia.”

Ash said consumers should have a better idea after the first quarter of 2009 what kinds of stimuli governments plan to inject into the economy, which should bolster confidence through the rest of 2009.

“The good news, from the first-time homebuyer’s perspective, is that homes will become slightly more affordable, provided they have the confidence to buy,” Ash said.

Re/Max said Metro Vancouver will have experienced a 33-per-cent drop in sales by the end of 2008, and 2009 sales should end at the same level. Vancouver’s average price at the end of 2009 should be seven per cent below 2008’s average price.

Victoria and Kelowna, after experiencing 23-per-cent and 37-per-cent declines in sales, should see sales decline a further 11 per cent and 10 per cent, respectively. The 2009 average prices in those cities, in Re/Max’s assessment, will dip 10 per cent from 2008.

Nationally, Re/Max expects sales to decline 15 per cent by the end of 2008 to 440,000 units and stay at that level for 2009. It believes the national average price will decrease three per cent to $300,000 in 2008, and a further two per cent to $293,000 in 2009.

Re/Max’s assessment is the latest of the fall forecasts tracking B.C. and Canadian real estate markets. Not all came to the same conclusions.

Canada Mortgage and Housing Corp.’s 2009 forecast is for B.C.’s average price to decline nine per cent in 2009 and provincial sales to fall just under one per cent.

Central 1 Credit Union’s forecast calls for 13-per-cent declines in B.C.’s average price for 2009 and a further five per cent in 2010, when it expects the market to recover. It expects sales to drop 17 per cent in 2009.

Other analysts have estimated that prices in B.C.’s markets overshot their equilibrium on the up-cycle, such as Carl Gomez, vice-president of research at Bentall Investment Management, who believes prices might have spiked as much as 30 per cent over equilibrium.

However, Ash said B.C.’s markets have geography and demographics going for them in the long run. Over time, the province will continue to be the place where baby boomers move in retirement.

“There’s no reason for British Columbians to be overly concerned about the value of the real estate they’re holding today,” Ash said. “It will come back in a big way.”

(prepared by Derrick Penner/Vancouver Sun)