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Vancouver home prices to jump another 7.2% in 2010: survey

VANCOUVER — Realty firm Royal LePage has come out of the gate of 2010 with the prediction that Metro Vancouver’s home prices will inflate another 7.2 per cent in 2010, so long as the expected mid-year rise in mortgage rates isn’t a dramatic spike.

Royal LePage, in its forecast released Thursday, says that based on the momentum of the sales surge during the last half of 2009, and with mortgage interest rates continuing at near record lows, the first half of 2010 should remain strong.

“The stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity levels to new highs,” Royal LePage CEO Phil Soper said in a news release.

For Metro Vancouver, that should mean upward pressure on prices, along with a modest increase in sales compared with 2009, a year that saw sales and prices come back at double-digit increases from 2008 the downturn year of 2008.

Chris Simmons, owner of Royal LePage Westside in Vancouver, said in an interview that the firm based its expectations for price increases on how prices performed over the last quarter of 2009.

“[We saw] stronger prices in the last quarter of 2009, and we take a look at that, try to temper the prices and come up with our best guess as to where prices will be for the full year of 2010,” Simmons said.

“I think that seven-per-cent price increase over the full year, [compared with] the full year of 2009 is a pretty reasonable expectation.”

However, what actually happens will depend on how banks respond in the second half of the year as the Bank of Canada is free from its commitment to hold its key overnight lending rate at a record low 0.25 per cent until June 2010.

Simmons noted that the average price of a Metro Vancouver home, across all property types, averaged over the full year, hit $592,000 in 2009, which was only $1,000 off the peak-price year of 2008.

Cameron Muir, chief economist for the B.C. Real Estate Association, said in his forecast that rising prices pose the biggest risk to the market if interest rates make a substantial rise.

Canada Mortgage and Housing Corp. analyst Robyn Adamache said her forecast is that mortgage rates could ease up a manageable 0.5 to 0.75 of a percentage point by the end of 2010.

“I think if we have stability in the economy and interest rates don’t go up dramatically, I think our forecast will ring true,” Simmons said.

He added that the real estate sector’s biggest concerns are over the affect rising rates, which would damage the ability of home buyers to come up with a mortgage payment they can afford and the possibility of the return of bad economic news that could shake the recovering confidence of consumers.

Royal LePage, like other forecasters such as Canada Mortgage and Housing Corp. and the B.C. Real Estate Association, believes there will be a “modest increase” in the number of sales cleared through the industry’s Multiple Listing Service beyond the 35,669 seen in 2009.

Along with its forecast, Royal LePage chronicled the price performance of specific property types in cities across the country.

In Vancouver, Royal LePage saw the average price for a detached bungalow in the fourth quarter of 2009 shoot up 11.4 per cent to $828,750 compared to the same period a year ago.

The price of a standard condominium was up 12 per cent to $452,750 over the same period.

The price of a standard two-storey home in Vancouver was up almost 10 per cent at $917,500.

“Regions that saw the strongest declines during the recession are now showing marked gains,” Royal LePage said in its report.

“Those regions include Toronto and the Lower Mainland of B.C. Vancouver in particular experienced a robust quarter, with home prices rising across all housing types surveyed.”