By Christopher Donville
Nov. 19 (Bloomberg) -- West Vancouver builder Sean Hanley thought Canada's real estate market would be immune to the housing recession that sent values tumbling in the U.S. Then the economy slowed and oil prices fell.
The price of a detached house in this upscale community fell 22 percent in October from a year earlier, helping to drag the average residential price in Canada down by 9.9 percent, the biggest decline in 26 years, according to the Real Estate Board of Greater Vancouver and the Canadian Real Estate Association. For Hanley, that's meant nary a buyer for his five-bedroom home.
``It's been a little bit surprising the consequences of the subprime crisis have been so far-reaching,'' said Hanley, 48, who has cut his asking price to C$3.99 million ($3.26 million) and is now offering a C$100,000 bonus, on top of regular fees, to the agent who delivers a buyer.
The speed and magnitude of the price declines in parts of metropolitan Vancouver and across the country are startling some Canadians, who haven't seen a recession since 1992, said Ken Peacock, director of economic research at the Business Council of British Columbia.
Many homeowners felt Canada, the world's eighth-largest economy, would escape the U.S. credit crisis, aided by surging commodity prices and a scarcity of loans made to people with limited or bad credit records, Peacock said.
Housing `Shock'
``It's been a shock for some people,'' Peacock, 42, said in an interview. ``They sort of embraced the idea that we had a strong domestic economy and we would be insulated.''
Real estate in greater Vancouver, Canada's third-most- populous urban area, has historically been more expensive than the rest of the country because of the mild winters and Pacific Ocean setting against a backdrop of rainforest-covered mountains, real estate agent Charles Bilash said.
The port city's economy has also benefited from population growth, reductions in taxes and construction of highways, a subway line and venues for the February 2010 Winter Olympics Games.
Since early June, Canada's benchmark Standard & Poor's/TSX Composite Index has tumbled 42 percent, as crude oil and other commodity prices have slumped and the U.S. and Canadian economies slowed. Canada's currency has sagged 17 percent against the U.S. dollar since midyear.
Bank of Canada policy makers last month forecast the economy to contract at a 0.4 percent annualized pace this quarter, compared with a prediction in July of 1.8 percent growth. Canada relies on the U.S. for more than 80 percent of exports.
Sitting on Sidelines
That's bad news for Hanley, who put his 6,000 square-foot home on the market almost a year ago for C$4.3 million. The house boasts an unobstructed Pacific Ocean view, sun-filled patios and an infinity swimming pool.
``People aren't making major acquisitions while their net worth is declining,'' Hanley said.
Prices in Canada's leading cities also have fallen from their peaks, though Vancouver may have the most to lose. In October, greater Vancouver prices were almost double the national average of C$281,133.
The average home price in Toronto, Canada's financial capital, plunged 11 percent in October to C$353,018, according to figures released Nov. 14 by the Canadian Real Estate Association.
Declines in Canada are beginning to mirror those in western U.S. cities, including Seattle and San Francisco.
Pending sales of single-family homes and condominiums in Seattle fell 26 percent in October to 578 units from the same month a year earlier, according to the Northwest Multiple Listing Service. The median home price fell 5.4 percent to $375,000.
Tracking the U.S.
While home sales rose 45 percent in September in the San Francisco Bay Area, the gain was largely due to foreclosures. The median price slid 36 percent to $400,000, according to MDA Dataquick.
``Canada's housing market seems to be tracking the U.S. with a two-year lag,'' said David Wolf, a Toronto-based economist with Merrill Lynch & Co.
In Hanley's West Vancouver, 565 detached homes were on the market last month, 88 percent more than a year earlier, according to the Real Estate Board of Greater Vancouver.
Sales fell to 19 from 51 a year earlier. The price of a benchmark, or typical, detached house in West Vancouver declined to C$1.14 million from C$1.46 million a year earlier, said Craig Munn, a spokesman for the board.
Though Hanley says his offer of a C$100,000 bonus has increased awareness of his home, he's starting to think it may be easier to rent the place.
``The only other option is to reduce my asking price by C$600,000 to C$700,000 to where I'd be virtually giving the place away,'' Hanley said. ``I'm not about to do that.''
To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net.
source: bloomberg.com
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Housing Slump Hits Canada as Seller Offers C$100,000 Deal Bonus
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