Victoria Market Overview

As of July 12th, the Bank of Canada has taken further actions to fight inflation, with a specific concern regarding the Real Estate sector, by taking the second consecutive interest rate hike of 25 basis points. This brought us up to an overnight rate of 5% which is the highest rate we have had since April 2001 almost 23 years ago.

Despite the efforts to control inflation, demand in the Real Estate sector has remained high and the supply side, including new housing starts and inventory, has been lagging. Some economists have laid the blame for slow construction on increased building costs, including borrowing costs.

So far in the month of July (as of July 17th), looking at the sales per day and listings per day we are almost exactly even with last year. A little slower on new listings per day but only marginally. This means that at least the interest rate increase in June has had little effect on the market so far.

Part of the reason for this, other than the lack of significant inventory increases and new construction, is the increase in population especially through immigration. Last year Canada took in the highest number of immigrants since 1931 which helped with labour shortages but definitely added to pressure on the demand side with more people looking for homes, both rentals and for purchase.

Getting Into The Numbers

Looking back to June, the Victoria Real Estate Board (VREB) region saw an increase in property sales, with a total of 705 properties being sold. This is an increase of 15.2% compared to the 612 properties sold in June 2022. However, there was a slight decline of 9% in sales compared to the previous month, May 2023, as is expected and typical heading from spring to summer.

Breaking down the year-over-year numbers, condo sales saw an increase of 19.8% from June 2022, totalling 242 units sold. Single-family homes also experienced an increase of 6.6% from June 2022, with a total of 322 units sold during the same period.

By the end of June 2023, there were 2,342 active listings available for sale, which is a 7% rise in comparison to the previous month of May. This is also 13.7% up from the 2,059 active listings recorded at the end of June 2022.

Considering Price

We have always known that Victoria and Vancouver Island are somewhat more insulated from market downturns than the other parts of the country due to the willingness of buyers with money to relocate here regardless of market conditions. We often see clients who are selling in large urban centers and either retiring here or simply looking to change the pace of their lives. Those clients care less about interest rates because they have lots of cash equity.

That being said, recently we have seen a bit of a run from prices with no corresponding pressure from affordability factors whatsoever. This means buyers were still somewhat optimistic and maybe were betting on a continued stall of interest rate increases. The previous fall in prices, starting about 12 months ago, corresponded heavily not to any increase in inventory but instead to a complete withdrawal of buyers for a relatively short period of time. It’s not unthinkable for recent history to repeat itself.

Both actual sale prices and list prices reported on the MLS increased from May to June in Victoria. Looking at Benchmark prices according to the Home Price Index single-family homes increased almost 1% from the previous month to hit $1,310,100, still down 7% from last year. Condos also increased month over month but are still down 9% from last year.

Looking Forward

September 6th is the next scheduled announcement from the Bank of Canada and will be the biggest factor for the near future of the Real Estate market. As we said, we haven’t seen any big immediate change from the June rate increase in the sales numbers and we won’t be able to see the effects of the July announcement for some time. Anecdotally things are slowing down a little bit around the office but it's not at all dead by any means and it feels more like normal summer activity.

Inventory has been very slowly crawling back up although still not near historically balanced market levels. As more and more homeowners come up for renewal at much higher rates we might see that pick up. At the same time on the buyer side the right time to buy, generally speaking in Victoria is when you can afford it. Rates will come down, it's just a matter of when, and at that time there will be upward pressure on prices. The only question is how many sellers will be forced to list their homes before then.

Neal Estate Group Highlights

The Neal Estate Group kept up the momentum heading into the summer selling 1 in 28 listings in the area. We also were able to participate in a local charity baseball match at Royal Athletic Park with our RE/MAX Generation family and we were Victorious against first responders (police and firefighters). Thank you to everyone who came out to support. We will also have some client events coming down the pipe so stay tuned for your invite.