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VANCOUVER, British Columbia (Reuters) - When Bob Stark bid on a loft apartment in a trendy Vancouver neighborhood in June this year, he wasn't expecting competition.
House prices in the traditionally expensive West Coast city had dipped because of the recession and a friend had recently bought a house nearby for a good price.
The first showing of the 1,150-square-foot water-view apartment opened at 2 p.m. on a Tuesday and Stark was there with his real estate agent. So were three other couples.
An hour after the show-day opened, the first offer was in. By the time Stark put in his bid three hours later, there were already three offers on the table.
"It was nerve-racking. You don't have time to think," the 35-year-old marketing executive said about having to make a snap decision to either up his offer or walk away.
He raised his bid and won the log cabin-like suite he had fallen in love with for C$15,000 over the C$600,000 ($566,000) asking price.
Vancouver, a postcard-pretty city on the Pacific Coast has long been Canada's most expensive housing market.
A 2,200 square-foot, four-bedroom home on one of its leafy streets would have cost on average an eye-popping $1.17 million this year, according to international real estate firm Coldwell Banker.
That's double the cost of a similar home in Toronto, Canada's biggest city, and almost three times that of Montreal.
Vancouver's trim neighborhoods are full of battle-scarred homeowners with tales of bidding wars, overnight lineups for condominiums that haven't even been built yet and lightning-fast sales.
Then, in late 2008, Canada really began to feel the economic downturn, triggered in part by a meltdown of the U.S. housing market. Seemingly gravity-defying house prices and sales in Vancouver started to deflate when would-be buyers were scared off by fears of a deepening recession.
But not for long. By the end of March this year, it was as if "someone turned on a tap", said Re/Max real estate agent Pam Allen, mirroring a trend across Canada that has led many to wonder if a property bubble is forming.
"I certainly didn't expect competing offers so soon again," said Allen, who has been in the Vancouver real estate business for 29 years.
The boom has been spurred in part by rock-bottom interest rates, which the Bank of Canada has warned won't last indefinitely.
But real estate agents are quick to insist the market is not entering bubble territory. They say bidding activity is less fierce than in early 2008 and the market is already slowing for the traditionally quieter winter period.
Others are more wary.
"What is cause for concern is just how quickly things have come back from the downturn. If the pace we had over the summer were to continue ... it really puts us back in overheated territory," said Tsur Somerville, associate professor at the University of British Columbia's Sauder School of Business.
Although surprised by the rapid return of multiple bids, Royal Le Page real estate agent Monte Hannah said there is no magic behind the city's perennially high house prices. It's simple supply and demand economics, and limited building space.
"There is no more land to develop in Vancouver. We have even developed all the parking lots downtown," he said.
With mountains in the north, the Pacific Ocean to the west and the U.S. border to the south, east is the only direction for the city to expand, and that was done decades ago.
Each year, surveys rank the city as one of the world's most desirable places to live because of its temperate climate and natural beauty. It is right on the ocean but the mountains, which offer world-class skiing in the winter, are just half an hour's drive from downtown.
Of the 40,000 immigrants that move to the province of British Columbia every year, most gravitate to Vancouver.
On top of that, the city has long been a popular destination for international real estate investors, attracted by the high rentals they can generate.
Money from Hong Kong investors, edgy ahead of the city's handover to Chinese control in 1997, is credited with changing Vancouver's skyline as funds poured into new condo towers.
And many think the prices are certain to get a boost after next year's Winter Olympics, which will shine the spotlight on the city for two weeks in February.
Re/Max's Allen points out that although Vancouver property may seem astronomically priced in Canada, when compared with some U.S. and European cities it is actually "very reasonable".
"When I am working with someone from Switzerland or Germany or France, they are surprised by our prices, but they are surprised that they are so little," Allen said.
Editing by Jeffrey Hodgson and Rob Wilson