Recently released reports on the Lower Mainlands real estate market hold a message for the sellers of high-end homes in West Vancouver: The party, it would seem, is over.
In a June 4 data package, the Real Estate Board of Greater Vancouver reported that regional home sales had seen their slowest May since 2001, and that the decline had been led by a once white-hot West Vancouver and other pricey enclaves.
For much of last year and perhaps longer, the Lower Mainland saw a frenzy of buying at the upper end of the market, widely believed to be driven by an influx of investment from China. The phenomenon pushed the price of already expensive property into the stratosphere, with a typical West Vancouver detached home jumping 20 per cent in just 12 months, according to the board. Tony neighbourhoods in Richmond and Vancouvers west side saw similarly disproportionate booms.
The latest batch of data, however, suggests that surge in luxury purchases has slowed. Sales in West Vancouver saw a dramatic drop in May, according to the real estate board, with just 100 residences changing hands compared to 201 for the same month last year.
By contrast, sales in North Vancouver, where prices rose only 12 per cent in 2011, remained on a par with last years: Some 255 homes sold in May compared to 252 in 2011. That number was more than eight per cent up from 2010 and 11 per cent up from the slump in 2008.
But despite the apparent slowdown at the high end, home prices in West Vancouver havent dropped significantly. The price index for a detached house in the community stood at $1.95 million in May, down two per cent from the month before, but still up 10 per cent from a year ago.
In North Vancouver, meanwhile, the figure had actually gained a little, standing at $977,000 in May, up a hair from the month before and up seven per cent compared to May 2011.
Home sellers have outpaced buyers in recent months, however, there continues to be an overall balance between supply and demand in our marketplace, said Eugen Klein, the real estate boards president, in a release.
Other reports released this week suggested the outlook for the whole Lower Mainland market will soon darken, however although it will stay relatively good compared to much of the world.
On Monday, economists at TD bank warned that price increases in the Vancouver region appeared to be slowing, and predicted the market would begin to slide in 2013, eventually falling about 15 per cent. It will be a relatively soft landing, however, according to the organization.
It seems like the housing market has gotten ahead of overall fundamentals, so with that 15 per cent correction, its going to be returning prices to levels we saw at the end of 2010, said Sonya Gulati, a senior economist with TD, in an interview. Were anticipating the 15 per cent overvaluation to gradually unwind over two years.
The decline will likely be catalyzed by a modest rise in interest rates, which TD expects the Bank of Canada to implement in September, she said.
Scotiabank published a similarly tempered assessment on Wednesday, noting that prices have dropped slightly across the country when adjusted for inflation, but that they are not at immediate risk of a crash.
TDs Gulati cautioned, though, that things could take a dramatic turn for the worse in the event of a global economic shock.
If China were to have a really hard landing, if Europe were to blow up or something like that it, would be a significant shock to the Canadian economy, she said. (It) could mean a significant correction to the housing market over a shorter period of time.
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