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 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.
Hello, real estate enthusiasts. Welcome back! Let’s examine the numbers shaping the Victoria and Vancouver Island real estate landscape.
Sales Overview
Last month, 571 properties were sold in the Victoria Real Estate Board region, a 15.8% increase from the 493 sales recorded in September 2023 and a 4.8% uptick from August 2024. Notably, condominium sales surged by 21.9%, with 189 units sold, while single-family homes saw a 19.3% increase, totaling 272 sales.
Market Stability
According to Victoria Real Estate Board Chair Laurie Lidstone, the market is currently exhibiting stability and predictability that hasn’t been seen in recent years. “We’ve experienced several months of near-balance,” she notes. This environment is neither heavily skewed toward sellers nor buyers, creating advantageous conditions for both parties. Factors like declining interest rates, stable prices, and increased inventory contribute to a more comfortable navigation experience for consumers. It's worth noting that although markets are relatively balanced at a macro level, there is notable variance depending on the property and listing price. For an attractive property listed at the right price (i.e., well kept, excellent curb appeal, turn-key, shows well, updated, newer/excellent condition), this kind of home can receive multiple offers and even backup offers. At the same time, if a less attractive home is just a bit overpriced, it can wait on the market for a long time.
Active Listings
At the end of September 2024, there were 3,361 active listings on the Victoria Real Estate Board's Multiple Listing Service®—up 5.3% from August and a 24.5% increase from 2,699 listings in September 2023.
Lidstone emphasizes that there’s less pricing pressure in balanced markets, allowing buyers and sellers the luxury of time to make informed decisions. However, desirable homes can still spark competitive bidding, especially when the location, price, and features align perfectly with potential buyers. This is exactly what we're seeing on those appealing, well-priced homes mentioned above.
Benchmark Values
The MLS® Home Price Index benchmark value for a single-family home in the Victoria Core stood at $1,316,100 in September 2023. By September 2024, this value decreased by 2.8% to $1,279,700, down from $1,287,400 in August. Similarly, the benchmark for a condominium dropped 5.1%, from $583,400 in September 2023 to $553,400 this year, also down from $559,200 in August.
Promising Conditions
The current market seems to be shifting directions, and there is a strong positive influence coming from the change in cost for both variable and fixed mortgage rates and a general increase in affordability as both inflation and interest rates continue to fall.
Interest Rates & Variable Mortgage Rates
Although various market conditions still need to be worked out, we see a few promising signs going into 2025. The first is the continued Trend toward falling interest rates and mortgage rates. The Bank of Canada (BoC) has dropped its overnight lending rate three times this year and is expected to drop this rate two more times before the end of the year. South of the border, the Federal Reserve has also made its first big rate cut at 0.5%, which is two-thirds of what the BoC has done so far (three 0.25% cuts totaling 0.75%). Both cuts are good news for variable rates in Canada and the US since the fall in central bank interest rates tends to lead to falling variable mortgage rates.
Bond Yields & Fixed Mortgage Rates
As with interest rates, we're also seeing a positive development in the Bond Market. Although we could go into much detail on this matter, the short explanation is this. The bond market pays investors interest to borrow investment capital. The rate at which interest is paid is called the bond yield. For banks and lenders, bond market investment is a safer, lower maintenance place to deploy capital than in the mortgage market. It's safer because large institution and government bonds are typically more secure than individual home mortgages. It's lower maintenance because banks can purchase millions of dollars of bonds in a single transaction. In contrast, banks typically need to set up and administer each mortgage one at a time for each purchased home. If bond yields rise, the premium banks receive for mortgages versus bonds becomes smaller. This motivates banks to charge an additional mortgage premium by raising interest rates since their investment dollars are now worth more in the bond market. That also means that when bond yields fall, so do mortgage rates.
So why does this all matter? Well, bond yields have generally been declining since their peak in 2023. In particular, the Canada 5-Year Government Bond is down to around 3% from its recent historical high of 4.32% in 2023. It's also worth noting that bond prices tend to increase when interest rates fall, and when bond prices increase, their relative bond yield tends to fall as well. So, the current falling rate environment seems likely to spur on lower bond yields, which should continue to support falling fixed-rate mortgages. The BC Real Estate Association has forecasted that your typical 5-year fixed-rate mortgage will hit its lowest point (4.6%) by the end of 2024, then settle out to 4.85% toward the end of 2025.
Inflation
As we've discussed previously, central banks are generally responsible for promoting economic welfare within a state by encouraging market stability and growth. This generates two main priorities: controlling inflation and encouraging GDP growth. However, of these two priorities, inflation is the primary concern. This is because central banks have fewer tools to combat inflation once it gets out of control, and runaway inflation is a much worse problem than an economic recession; think about the harm of hyperinflation in 1920s Weimar Germany.
Fortunately, our recent inflation woes seem to be getting under control, with Canadian inflation down to 2% and US inflation now down to 2.53%. The fact that inflation is down means Canadian and US central banks can now focus on economic recovery and growing our connected economies. Falling inflation supports the fall in fixed and variable interest rates in two different ways.
For variable rates, falling inflation allows central banks to cut their overnight lending rates, which directly impacts the amount that banks charge for variable mortgages. As the borrowing cost falls for banks and lenders, these same institutions tend to drop their variable lending rates for borrowers to remain competitive in the mortgage market.
For fixed rates, falling inflation means that interest rates on bonds and bond yields tend to fall, causing fixed mortgage rates to fall as well. This is because high inflation tends to erode the real value of a bond. For example, if a bond pays a 4% yield, but inflation is at 3%, then the bond's real return is only 1%. However, as inflation falls or is expected to fall, the value of bonds rises, meaning that the bond yield ticks downwards. (i.e., if a $100 bond yields $4, its current bond yield is 4%, but if the bond price goes to $125, its $4 bond yield drops to 3.2%). So, in an environment where inflation is expected to decline and remain lower, fixed mortgage rates should decline as well.
Short-term Forecasts
In the short term, the above developments could mean that lower costs and greater market certainty create rising demand for homes, as we are already seeing. One market forecast predicts that Canadian home prices could return to all-time highs by the end of 2025 and then continue higher going into 2026.
Longer-term Forecasts
In the longer term, the BC real estate market is showing a lot of growth potential. In a recent interview with the BCREA Chief Economist Brendon Ogmundson, it was reported that a lower-than-average annual appreciation of home prices at 4% would result in a 50% increase in home values over the next 10 years. That would mean a $1M home will increase to $1.5M over the next 10 years. However, BC home prices have historically grown by 6% per year since 2000. So, if historical rates continue, that could push a $1M home up to $1.8M over the next 10 years!
Key Takeaways
571 properties sold in September 2024, up 15.8% Year-over-Year (YoY).
Active listings rose to 3,361, a 24.5% increase YoY.
Single-family home prices decreased to $1,279,700, a 2.8% drop from last year.
Condominium values decreased to $553,400, down 5.1% YoY.
Inflation has fallen to 2% in Canada and 2.53% in The US
Both variable and fixed interest rates are declining
The combination of Increased affordability and better market certainty are positive signs
Both short-term and long-term real estate forecasts are increasingly positive
Summary
In summary, the market shows signs of stabilization and recovery. While some buyers may be tempted to wait for interest rates to fall further, buyers should be cautious not to wait too long, as falling interest rates will likely invite increasing demand and competition, which may result in rising prices sooner rather than later. For sellers, time seems to be on your side unless you also want to make a purchase. If the trend continues, the longer you wait, the more you'll stand to get for your home. However, every situation is different. If you're upsizing, you probably want to move faster to save more on your more expensive purchase. If you're downsizing, then you probably want to hold off since you stand to make more on your current home. If you are changing markets, then it will depend on the demand and home prices of each market. If you're contemplating a move, don't hesitate to reach out so we can plan out the best approach for your needs. As always, keep an eye on these trends as they evolve!
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
Listing Agent
A listing agent helps sellers list their home on the market and get the best possible price for their home. Your listing agent will guide you through the ins and outs of carefully providing an appealing but accurate description of your property to sellers. They will help coordinate photos, floor plans, inspections, and vendor quotes for repair and updates. They will also assist you with market analysis, planning, paperwork, showing coordination, advertising, negotiation, and other forms of advice and support.
Read More:
Resources
1. VREB Insight:
2. Mortgage Calculator:
3. Mortgage Rate By Bank:
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