Lower prices in Vancouver could play a spoilsport

As per latest sales stats, the Vancouver housing segment is reflecting the early symptoms of a cooldown, and analysts at National Bank Financial have alarmed that a shooting drop in real-estate prices might just dismantle Canada’s largest banks.

In their August 22 report, the analysts stated, “As home prices drop, households will spend less. As consumption falls in Vancouver, so too will employment.”

Another report released the same day quoted Fitch, the leading credit rating agency, as stating that the most recent performances of Vancouver “suggests that the city’s market may already have begun to cool and is increasingly vulnerable to price declines if there is a rise in the unemployment rate.”

MLS data relating to the period before the BC government introduced the new 15 percent tax on foreign buyers unearthed the fact that sales volume in the Greater Vancouver region fell be a striking 18.9 percent year-by-year in July, in spite of the 32.6 percent growth during the same period.

These warnings more or less replicated those given by Jason Mercer, assistant vice president at Moody’s Investors Service, when he forecasted that the biggest lenders in Canada, including all major banks, could lose about $12 billion in a hypothetical housing meltdown.

Mercer stressed that any “cash flow shortages” sprouting of higher unemployment would result in a “hierarchy of credit sacrifice” that’d envelope mortgages, with vehicles and credit cards being the first to go under the knife.