What does the current Victoria real estate market look like?
As part of our monthly Market Insight Series, I am excited to continue to bring you regular insights into the Victoria and Vancouver Island market trends, so you can make better buying and selling decisions. Below I will jump into the most important market numbers to look into, I will provide glossary term definitions, and will conclude with resources if you want to further research current trends and stats. If you want to see what the Market Insight for the previous month was, click here.
(Mortgage rates have been updated to include smaller lenders)
The real estate market in Victoria experienced a slow start in January 2023, with a 41.4% decrease in the number of properties sold compared to the same period in 2022. According to the Victoria Real Estate Board, 278 properties were sold in January, down from the 474 properties sold in January 2022. The sales of single-family homes decreased by 33%, while sales of condominiums were down by 46.3% from January 2022. Despite the sluggish start, the Victoria Real Estate Board noted a mid-month surge in activity, with many buyers regaining confidence after the rapid interest rate increases of last year. There is optimism among real estate agents, as buyers and sellers remain active, viewing homes and making offers. The number of active listings for sale in Victoria increased by only 3% in January 2023 compared to December 2022, but is still 133.7% higher compared to January 2021. The Multiple Listing Service Home Price Index benchmark value for a single-family home in the Victoria Core area decreased by 3.5% from December 2022 to $1,251,100 in January 2023, while the benchmark value for Victoria Core area condominiums increased by 3% from December 2022 to $578,300.
The existence of uncertainty, generates risk for both buyers and sellers in the current market environment. Not knowing which way the market will go can be scary for buyers who are worried about purchasing a property that may continue to drop in value. Simultaneously, the same uncertainty and prevailing lower prices is creating hesitation for home owners to list and sell their properties. For the latter, many home owners are happy to keep what they have and wait for the storm to blow over, and rightly so for many of these people. If you are a home owner that locked in a good interest rate while mortgage rates were low, and now you'r property has just dropped in value you have at least two reasons not to sell. First, because you'll be actualizing a loss in property value relative to market highs, rather than waiting for markets to recover and selling when the markets start to climb higher. Second, because if you are selling in order to purchase, and you're not buying in cash, your new mortgage could be a lot higher if you have to renew your financing. However, this hesitance to sell will only serve to keep real estate inventory low. As long as supply is suppressed this is likely to put a floor on housing prices and could likely become a driving factor that encourages either price stabilization or slight growth in 2023.
On a higher level, while the Bank of Canada (BoC) has been increasing interest rates through a rapid tightening cycle, this cycle like any other must eventually come to an end. At this point the BoC will now have to make the awkward transition from tightening to pausing interest rates, and potentially reducing interest rates if it turns out that their actions have been an over correction. This is a difficult transition since the BoC will want to pause interest rates in order to avoid causing too much damage to the Canadian economy. However, they also want to avoid signalling a return to growth which could spur on buyers and investors and lead to entrenched inflation. Since it's unlikely that the BoC will be able to pause or reduce interest rates without impacting the behaviors of buyers and investors, their actions or inactions should give buyers and investors an indication of where the market is heading into the middle/end of 2023. Holding all else equal, if interest rates pause and housing inventory remains low, it's reasonable to expect these variables to establish a market bottom soon. To me, the fact that variable rates are now higher than fixed rates is a positive sign. It suggests that there is a higher demand for variable rates as buyers are anticipating current rates to go down.
Below is a table that outlines the current housing benchmark pricing along with a sample calculation that can give you an idea of what it might cost you to own a home.
Opportunities for ordinary people looking to get into their first home, or move up into an affordable nicer home are still out there, it just takes a bit of diligence, and ideally the support of a committed agent.
Conclusion
The goal is to give you insight into what the overall market view looks like in Victoria and Vancouver Island. I have included more Resources below so that you can dive in and read more at your leisure. I will also make sure to include a new Glossary Term each month, and define it to add to your knowledge of common industry terms.
Feel free to contact me if you want to learn more or if you have any questions about the broader market trends.
Glossary Term
Single Family Detached House
A single family detached house is what you think of as the typical family home. As the name describes it is a detached home, meaning it does not share a wall with other properties the way that a row/townhouse or condominium would. Single family detached homes are typically freehold properties meaning that the owner is not restricted by strata bylaws and can generally do what they want with the property as long as it is legal and permitted by the local municipality. These properties are also usually without a monthly strata fee and the owner is solely responsible for maintaining their house. A single family detached home can also belong to a strata such as a bareland strata in which bylaws, rules, and a monthly strata fee may apply.
Read More:
Resources
1. VREB Insight:
2. Mortgage Calculator:
3. Mortgage Rate By Bank:
Comments