The price correction ravaging Vancouver’s housing market may have been the result of a bubble, but it definitely doesn’t exist in one. The trend of falling prices in the city is bleeding into condo markets in the surrounding suburbs, notes local realtor Steve Saretsky.

“The Fraser Valley suburbs, which became the idle recipient of a spillover of cheap credit created in the depths of the Vancouver real estate boom ….. [are] now facing repercussions as the party comes to an end,” writes Saretsky in a recent blog post.

“With home prices correcting in the city of Vancouver, the ripple effect has spread across the city and into the Fraser Valley, particularly in the once euphoric cities of Langley and Abbotsford,” he continues.

Langley condo prices are down 10 percent from their June 2018 peak, while Abbotsford prices have collapsed by 14 percent over the same period. In January, the benchmark price of a condo was $408,800 in Langley and $307,100 in Abbotsford, according to the Fraser Valley Real Estate Board.

“Although, considering price growth had reached dizzying heights during the peak of the mania real estate bulls can perhaps chalk this up as just a minor set back,” Saretsky adds, noting that when the markets were peaking last summer prices were up a searing 49 percent annually.

Over the past six months, the benchmark price of a Vancouver condo has fallen 6.6 percent to $658,600.

In a followup interview with Livabl, Saretsky explains why the decline in Vancouver was less pronounced. “I just don’t think there’s as much demand,” says Saretsky.

Foreign investors are less interested in a suburban condo, he suggests, compared to one in the urban Vancouver market. “I tend it find it’s more resilient in that respect.”

Another reason the valley has gotten hit harder during slowdowns historically is the area is “a lot more blue collar,” Saretsky notes.

The far-reaching impact of price trends in major cities on their environs is well documented.

In 2017, national housing agency Canada Mortgage and Housing Corporation (CMHC) studied how Toronto home prices were influencing the nearby Hamilton market. CMHC identified a “spillover effect.”

Home prices in more affordable Hamilton increased 1.4 percent for every 1 percent gain Toronto had.

“Our evidence supports that increasing single-family home prices in the GTA are persuading buyers to make purchases in nearby communities like Hamilton, Barrie and Guelph where homes are more affordable than within the city. In turn, this is driving up house prices in these neighbouring markets,” a CMHC spokesperson said at the time.

Suburban Condo Prices are Nosediving as Vancouver’s Real Estate Party Comes to an End by Josh Sherman | Livabl