The bears are calling it a crash and the bulls are brushing it off. Well 5% drop in median over two years is not a crash but it is significant (I will show you how significant soon).
In fact in a normal RE market bear markets are usually flat or down a few % to 5% tops. However after the huge run-up we have seen where prices are up 100% in many cases, over the curse of the last half decade, 5% seems rather puny.
OK lets crunch the numbers:
Rent v Buy in Victoria Nov 2009-2011 each with $100k . the renter puts the 100K into a two year 2% GIC
Assume you bought two years ago at the median price of $555K with 100K down.
You mortgaged the balance at a 5 year fixed at 3.59% you would pay $2293 a month.
You have paid $8K of property transfer tax which is gone forever!
After two years you would owe $431K due to principle pay down.
We know that with taxes and repairs the cost of owning is more than renting. In Vancouver it can be 70% or more higher. I am not an expert on Victoria but I will assume it is 15% higher. Say $3500 a year more which is probably conservative.
Now assume you had to sell due to an unexpected emergency eg a job loss or transfer.
You sell at November 2011's median price of $530K
You pay 2.5% for selling related expenses and end up with 518K
You pay off the mortgage and are left with $87K of your down-payment. However you did pay $8K in PTT.
The renter has his 100K + 7K less he paid for renting and he got 4K on his deposited money (from which tax has to be paid of... lets say $1K)
Buyer walks away with 79K
Renter walks away with 110K
Not a crash but not insignificant. You can see why in Vancouver with it's much higher median prices, the difference will be even more severe should prices drop.
The HPI for SFH for the Sunshine Coast is down 6% in just the last year!