It’s going to get a lot worse before it gets better for the Greater Vancouver detached-home market — but when it does, low-rise real estate in the city is going to reach unprecedented heights.
So says a forecast from Eitel Economics, which uses a technical-analysis process to predict future market movement.
“That’s a stock-market technique that basically just tracks data points and where the trends lie,” explains Dane Eitel, the founder of Eitel Insights.
According to the forecast, the peak price of $1.83 million for a Greater Vancouver detached home won’t be reached again for several years.
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The average has already touched that level three times — January 2016, February/March 2016, and May 2017, says Eitel.
“That signals a triple top, meaning that there is no momentum to carry that higher for the near-term future.”
What follows probably isn’t what investors will want to hear. Eitel’s analysis suggests the market will bottom out in 2020 or 2021, with the average price of a detached home sinking to about $1.4 million.
The length of the cooling period is something Eitel attributes to the expanded stress testing that was introduced at the beginning of the year for uninsured mortgage applicants. He sees it as necessary because the market had already topped before it came into effect in January.
Eitel also figures the stress test will be a thorn in the side for some buyers who purchased detached properties at the market’s height. When their five-year mortgages come up for renewal, they may have difficulty re-qualifying because of the stress test.
“If you’re over-leveraged you can’t get your mortgage requalified because the stress test is in place… you are going to be in foreclosure procedures,” he says.
What kind of uptick in foreclosures is Eitel predicting? “Put it this way, I would anticipate that at least a quarter of the properties bought in 2016.”
That in turn is expected to bring out investors looking for deals on foreclosed homes. “When foreclosures come, investors naturally start coming,” says Eitel.
Cue the next runup, which Eitel sees lifting the average price of a Vancouver house to $2.8 million by 2028 following a parabolic five-year runup.
Eitel doesn’t see the previous high of $1.83 million as being a barrier to future price growth at all. “We are not really going to stop at that price because we’ve spent so much time up here,” he says.
Limited supply, already an issue in the market today, would cause prices to swell further. “The market will be robust again,” says Eitel. “There’s a lot of factors that are still upcoming, but I believe by 2028 we’ll see a $2.8-million purchase price, and then that will basically be the top of the next roll over,” he continues, adding, “And then we’ll grow again.”