SPECIAL REPORT - MLS CONDO PRICE FORECAST Jan. 15, 2010

How to produce an accurate and reliable price forecast for a market that can go in about a dozen different directions over the next year is a problem faced by every analyst dealing with the Vancouver housing market. The impact of the "biggest finanacial crises since the Great Depression" on the Vancouver housing market did not last as long as expected. In terms of average MLS apartment condominium selling prices, the price per square foot dropped by about 15% during the first quarter of 2009 compared to the first quarter of 2008. However, by year-end, average high rise and low rise selling prices were again close to the highs experienced in 2008.

While the big financial scare may not have had a lasting effect on sellig prices, it did reduce lending for new condominium projects. The net result of this is that at year-end 2009, according to CMHC, Vancouver developers had just over 8,200 high rise units under construction. Even if demand carries on at it's present rate of just 5,500 absorptions a year, it's clear that there will be a shortage of new units within the next 12 months. The low rise market is in the same situation.

However, countering the upward push on prices will the limitations on local buyers' financial resources. The average MLS selling price for high rise condos in Greater Vancouver at the the end of 2009 was $460,000 or $532 per square foot. The average list price in December 2009 was close to $600,500 or $621 per square foot. So far, buyers have favoured smaller, more affordable condominium product. As prices increase, these buyers will be squeezed out of the market and there's no indication that buyers with deeper pockets are filling the gap.

High Rise Price Forecast





Given all these considerations, a best guess is that, when measured in year-over-year increases, the average high rise price per square foot will increase by about 15% to 20% during the first quarter of the year and then slow down to a 6% increase by year-end. Annual price increases during the first quarter are going to be in the double digits because of the low prices during the first quarter of 2009. The average price by the end of 2010 is forecast to around $565 per square foot.

The overall average MLS price for high rise condos is forecast to increase from its present $460,000 to $523,000 by the end of 2010. This represents a 14% increase. If average price per square foot increases are less than overall price increases this implies that there will be fewer buyers for affordable product and fewer buyers in central markets.

Low Rise Price Forecast



 

Average MLS low rise condominium prices are expected to show a similar pattern to high rise prices in 2010. The average low rise condominium sold through MLS in December 2009 for $305,000 or $351 per square foot. Over the next 12 months, average low rise prices are expected to increase by about 9% to $331,000. The average price per square foot is forecast to increase by 7% to $374 per square foot.

For detailed price forecasts by specific market area, contact Strategics.