A report by Central 1 Credit Union economist Brian Yu predicts the median home price will increase 6.8% to $417,000 by the end of the year compared to 2010. This is despite the fact home sales are expected to decline in 2011, down 1% from 2010, to reach 88,200.
The Royal Bank of Canada has recently calculated ownership costs of an average two-storey home in Vancouver equals 95.5% of average income this year, a record high.
Yu defended his prediction in a statement, citing low interest rates, a limited supply of land, and a low percentage of speculation. It runs out most Vancouver buyers are living in their homes, with only 2-3% of properties owned by speculators, he said.
“Our research shows few signs that speculators are overly active in the Vancouver market, which means we are unlikely to see a speculation-induced bust,” Yu said.
And while the average price has skyrocketed in Vancouver, those jumps are mostly limited to particular areas of Vancouver where there have been a high number of luxury home sales such as Richmond. The rest of the market is more stable, he said.
“Even if the economy slows and employment slows, we expect to see individuals hold on to their homes, rather than sell them in a weaker market,” Yu said.
Yu’s report predicts in 2012 home sales in Vancouver will grow 3.4%, driven by new home sales, although existing home sales will decline.
Tax issues might push some home sales until 2013, said the report.
“People looking at new homes priced over $525,000 may very well wait until the tax changes lower the 12% hit they face,” said Yu.
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