In the past decade or so, Vancouver has been known for its red-hot real estate market. But the chief economist of a major Canadian bank just warned about a correction in Vancouver’s housing market.
At a conference in New York on Tuesday, National Bank of Canada (TSE:NA) Chief Economist Stefane Marion said that, “There is downside to single family homes in Vancouver.” (Source: “Vancouver Housing Market Set to Enter a Correction with Prices Falling at Least 10%: National Bank,” Financial Post, September 13, 2016.)
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Marion said that Vancouver’s housing market could enter a correction, with prices declining by at least 10%. However, due to strong job growth in the province of British Columbia, he doesn’t think the correction, “sends the economy into a tailspin.” In fact, he believes it would be, “a healthy correction.” (Source: Ibid.)
Note that in response to the soaring housing prices in Vancouver, the provincial government has started enforcing a new law requiring an additional 15% transfer tax being charged to foreign buyers in the Vancouver area.
Still, not everyone is forecasting a crash. Emanuella Enenajor, senior Canada and U.S. economist at Bank of America Merrill Lynch, believes that the low-interest-rate environment would help prevent Canada’s real estate market from crashing. She said she, “wouldn’t be surprised if, barring any meaningful regulatory shifts, housing continues to outperform.”
Enenajor also noted that, “Putting a foreign tax on the Vancouver housing market, perhaps that pushes demand into other markets such as Toronto, creates other kinds of distortions in the economy. I think there is a need for a national solution.” (Source: Ibid.)
Based on the latest data from the Real Estate Board of Greater Vancouver, the new foreign buyer tax did slow down the momentum in the city’s housing market. In August, the benchmark price for all residential properties in Metro Vancouver was $933,100. While the number represented a 31.4% increase compared to August 2015, it was only up 4.9% over the last three months. (Source: “Metro Vancouver home sales return to typical August levels,” Real Estate Board of Greater Vancouver, September 2, 2016.)
