The 30-percent increase in real-estate prices that Vancouver experienced during the course of 2015 is unusual but not unprecedented. That's the picture presented in a new report published by the B.C. Real Estate Association (BCREA).
Since 1981, there have been seven previous cycles where the average price for all Greater Vancouver properties increased by more than 20 percent year over year.
Despite the emotional pitch of today’s debate about how to bring the market under control, the 30-percent increase observed last January is not the sharpest spike in prices the region has seen. That was recorded in 1989, when the year-over-year rise was 45 percent.
“Periods of rapid price acceleration, defined as 20 per cent or higher year-over-year growth for the purposes of this report, are far from unusual in Vancouver,” the analysis reads.
It states that since 1981, there have been 46 months when a year-over-year rise of 20 percent or more was recorded.
The document is not a forecast but a presentation of past boom cycles. However, with an eye on the future, it emphasizes that such cycles have usually been followed by a cooling period that began not long after that 20-percent threshold was passed.
“Most periods of price acceleration were followed by a gradual moderation of price growth within 12 months,” it reads. “In two of the historical periods, price growth turned negative in the 12 months following a rapid acceleration. However, these periods coincided with an idiosyncratic or external shock, such as the leaky condo crisis of the mid to late 1990s, recessions or a tightening of monetary or macroprudential policy.”
As real-estate values climbed to new heights this year, some academics have suggested the current period of price increases is different from previous cycles.
For example, David Ley, a UBC professor of geography, published a paper last November that described how a new class of wealthy investors has emerged in Mainland China. Combined with policies of the Canadian and B.C. governments aimed at attracting foreign capital, Ley suggested, that has decoupled Vancouver’s real-estate market from the financial means of most long-time Vancouver residents.
In a brief telephone interview, the BCREA’s chief economist, Cameron Muir, said it remains to be seen if the current period of accelerated growth is truly unique from those that came before it.
“We have seen several cycles since the early ‘80s in which we have seen this happen,” he said. “Some of them were longer lived; some of them were shorted lived over that period of time. But from what we looked at, historically, it is not a surprise that we see these kinds of percentage changes. I think what would be more dramatic is if we are talking a year from now and we see these same kinds of price increases. Then I think it might be a different story.”