It’s an interesting time in real estate with so many different factors to consider when trying to speculate what will happen next, will prices continue to rise, flatten or fall. Many of the media reports we see speak very generally of national market conditions and price movements which we know vary substantially provincially, regionally and even within various property types, price ranges and neighbourhoods in individual cities.
It makes simple economic sense that the recent mortgage rule changes will have a negative impact on consumer demand and slow the market, as intended. The borrowing power of first time buyers and those with less than 20% down was immediately reduced by more than 15%. The result is that many of those buyers have put their plans on hold because they can’t afford to buy now. Fewer buyers tips the scale of supply and demand and will slow the market and lead to a loss of the increasing price momentum in overheated markets and in some already cool markets (i.e. Alberta) that will likely contribute to price declines.
Here in Victoria we continue to have a historic low number of listings available for sale and our prices didn’t rise for as long or to the same magnitude as Vancouver. Consequently most of our market is generally not overpriced relative to other significant markets, in my opinion. While there has been a noticeable change in consumer confidence generally and a decrease in the number of new buyers coming into the market, there seems to continue to be a massive backlog of demand, buyers trying to buy and having no suitable homes available for sale to purchase. The bottom line is that we still have a virtual flood of immigration underway with thousands relocating to Victoria, mostly from the lower mainland and also other parts of BC. People are moving here for lifestyle changes, tech sector and tourism jobs, student population continues to swell (especially foreigners). We have also experienced people leaving the US and relocating to Victoria in the wake of the US election. Furthermore the rental market also remains in short supply which has led to significant increases to rental rates over the past year, also attracting more investor buyers into the marketplace.
There were 735 residential properties sold in Greater Victoria in October 2016, down from 781 in September and 1 more than the 734 sold in October 2015. This continues to be a healthy and fairly normal sales volume, although significantly down from the record 1,289 in May of 2016. The listing inventory, however, has continued to decline, down to just 1,938 listings at the end of October. The previous month there were 2,061 and that’s nearly a 40% drop from the 3,170 active listings at the end of October 2015.
This ongoing imbalance of supply and demand, characterized as a “seller’s market”, has continued to put upward pressure on area prices through 2016. We’ve seen our Home Price Index benchmark increase year over year by 24% from $608,200 to $755,000 for typical Victoria Core Single Family Homes.
At the present time with inventory/selection at all-time lows and significant demand from anxious buyers, I would expect to generally see our prices remain stable or possibly even continue to increase. As more buyers take a “wait and see” attitude the market should stabilize some, but people need homes to live in, roofs over their heads and until the volume of listings available for sale increases significantly, I would expect to see continued strength in our market with stable or rising prices in some parts of Greater Victoria, property types and price ranges.
For a FREE consultation and analysis of your own property’s market value with no obligation of course, please contact us today for assistance.
Ron Neal, Broker/Owner, Team Leader, The Neal Estate Team, RE/MAX Alliance Victoria www.RonNeal.com
Full November VREB Release
Competitive Housing Market in Victoria Continues as Inventory Remains Low
November 1 2016, Victoria, BC
A total of 735 properties sold in the Victoria Real Estate Board region this October, a single property more than the 734 properties sold in October last year.
Inventory levels remain lower than last year, with 1,938 active listings for sale on the Victoria Real Estate Board Multiple Listing Service® at the end of October 2016, 38.9 per cent fewer than the 3,170 active listings at the end of October 2015.
"We continue to see low inventory hindering sales in the local market," notes Mike Nugent, 2016 President of the Board. "Though our numbers are down from the record setting pace set this summer, the market is still moving quickly and is still very competitive for certain properties. High demand areas like Saanich and Oak Bay continue to see multiple offers and areas in the West Shore are also seeing sales over listed prices. In other areas, prices remain firm because of high demand and extremely limited inventory."
The Multiple Listing Service® Home Price Index benchmark value for a single family home in the Victoria Core in October 2015 was $608,200. The benchmark value for the same home in October 2016 has increased by 24.1 per cent to $755,000.
"The federal government's change to mortgage lending rules has also impacted buyers," adds President Nugent. "Buyers that require mortgage insurance are able to qualify for significantly smaller mortgages than before the rule change and this is further limiting their options in a very restricted market. Some buyers have postponed their search in order to save up more of a down payment so they can work within these new limitations."
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