Housing Bubble you say?? What do our experts say?

Since 2001, we've been hearing about our doomed housing market. From a serious downturn to a full blown bubble bust, the naysayers continue to capture our attention and heighten our concerns. Is there any truth to the prophesized collapse? To find out, we asked some experts. " The fundamentals underlying housing demand in Vancouver are positive and will remain so in 2007", reports Gregory Klump, Chief Economist at the Canadian Real Estate Assocication. These fundamentals include a strong economy, high employment and income growth, and low interest rates.
Urban Futures Institute economist Andrew Ramlo expects international immigration will accelerate, along with in-migration from other provinces as baby-boomers start to retire and head west, " I also see job growth remaining positive, given rising investment in public infrastructure such as the RAV line, the Gateway Project and the Olympics," says Ramlo.
What would have to happen for a bubble to occur? Several telltale signs must exist, says Helmut Pastrick, Chief Economist at Credit Union Central of BC. " A necessary condition is a high level of speculation, " says Pastrick, who defines speculation as a market characterized by large numbers of investors buying homes which they hold for short period time periods, typically less than six months. To gauge speculation Pastrick uses Land Registry data. It indicates that in Greater Vancouver, just seven percent of properties are being bought and resold in less than six months. In 1981 this rate was three times higher and in 1990 it was about twice as high.
The most speculative activity is the downtown Vancouver high rise condominium market. There, 20 per cent of properties are bought and resold within six months. For evidence of a bubble analysts typically look for a telltale parabolic ( hockey stick-staped) increase in home prices. " This isn't the case right now," says Klump. " Home price increases in Vancouver have risen significantly in the past few years because of high demand and tight supply," explains Klump. " In the past few months, increases in average price have slowed." Now that sales are returning to more normal levels and new listings are on the rise, Greater Vancouver's housing market is becoming more balanced, concludes Klump. And, while prices are at an all time high, the majority of home buyers can still afford a home for two reasons:

• most first-time buyers ( about 20% of the market) typically pay less than the benchmark price, buying condominiums or townhomes in suburbs; and
• most buyers already own homes and are benefiting from rising prices as a result of increases in home equity position.

Source: REBGV ( Real Estate Board of Greater Vancouver)