by Mathieu Powell
The Multiple Listing Service® Home Price Index benchmark value for a single-family home in the Victoria Core for May was $825,500 – a 16.8 per cent increase over May last year. The last couple of years have smashed all records as demand far outstripped supply, but we might finally be seeing the end of dramatic price increases with more inventory coming to sale with the warmer weather.
“Overall, pressure on pricing is easing because of the increase in inventory and the rate of increase of price is normalizing,” says Victoria Real Estate Board President Ara Balabanian.“ As we have predicted, we are seeing the beginning of a gradual return to a balanced market in the Victoria area.”
While the steep climb is subsiding, don’t expect prices to fall, barring a major economic downturn in Canada. Greater Victoria just has too many positives going for it: A fantastic climate and lifestyle, a strong economy, low unemployment, and historically low interest rates. That translates into a strong and continuing demand.
Dubbed the “California of Canada”, Boomers across Canada are eying Victoria as part of their retirement plan. In a 2015 survey, over fourteen percent of retiring Canadian Boomers surveyed indicated a desire to move to Victoria. That’s easy to understand. We receive the least snow, our flowers are the first to bloom, and we enjoy over 2,000 hours of annual sunlight.
Vancouver retirees are selling in droves to enjoy a better retirement in Victoria. With over 97 percent of Vancouver’s homes valued at more than a million dollars, Baby Boomers who sell their homes in Vancouver to cross the Salish Sea can buy a much nicer home in Victoria and still end up with plenty of cash in their pockets. Realtors are also noticing many young families coming over from Vancouver for the better environment Victoria offers in which to raise their children.
“Our offshore market is Vancouver. It has been for the last year,” said Balabanian in a recent interview. “We’ve experienced the overflow from Vancouver. People are selling at very high prices over there and down-scaling over here.”
British Columbia’s labour market shows little signs of straying from its impressive trajectory. In 2016 B.C. led all the provinces with employment growth of 3.2 percent. Victoria’s economy is strong and vital with many industries supporting that growth: government, education, tourism, marine and high tech. Tourism had a record year in 2016 and there is every reason to believe the tourism industry will continue to be a major driver for Greater Victoria’s economy in 2017. The tech industry is robust and growing, and Victoria is well poised as a gateway community to Pacific markets. Our economic future looks bright.
The rest of the world is taking note of Victoria too. Victoria ranked as second on a list of the world’s hottest luxury markets in Christie’s International’s 2016 report, and the New York Times and Lonely Planet named our Canada as the number one place to visit.
As Canada celebrates 150 years, Victoria will shine like a desirable crown jewel and real estate prices will very likely continue to climb.
by Mathieu Powell
A few weeks ago, Victoria’s city council gave tentative approval to implement a foreign-buyer tax similar to Metro Vancouver’s tax introduced last August.
Proponents touted figures from the B.C. government stating foreign purchases in Victoria rose to 6.3 percent of all transactions in the Capital Regional District in October, compared to 3.3 per cent in September.
While that sounded alarming, a closer examination of the statistics revealed it is based on a small number, and as anyone even a little familiar with statistics knows, statistics based on small numbers are not very relevant. The number of houses sold to foreigners in this period was about 26 sales in September compared to 42 or 43 in October.
Not exactly a runaway problem. In fact, there has only been a very small uptick of foreign interest in the South Vancouver Island from foreign investors. (As a point of reference, there were 781 homes sold last September in the Victoria Real Estate Board Region (VREB) and 735 in the VREB region in October.
One of the councilors voiced a concern about the discriminatory nature of this tax; a tax that violates more than 30 international treaties wherein Canada has committed to treat foreign nationals as favourably as citizens.
In Vancouver, a class action law suit arose after the BC Government implemented the 15% foreign buyer’s tax. In a strongly worded statement of claim, plaintiffs stated the tax unfairly assumes foreigners have wealth, an assumption that perpetuates "prejudice and stereotyping." The tax also assumes that foreign nationals can outbid Canadian citizens and permanent residents in the housing market.
Many are now questioning just how effective the tax has is in light of the fact that Vancouver’s real estate is once again rising in price after only a few months of cooling. It’s also been pointed out that foreign buyers who eventually sell are obviously going to be motivated to recapture their costs, thus inflating future real estate prices in Victoria.
Would implementing a foreign buyer’s tax in Victoria effectively cool the market, or end up being a mistake?
Fortunately, Victoria City Council held a second vote and decided against it.
Victoria council gives tentative approval to 15 per cent foreign buyers tax – CBC News April 24th
B.C.'s foreign buyers tax violates Charter, proposed class action lawsuit argues – CBC News, March 3rd
CMHC Senior Market Analyst Eric Bond calls Victoria’s Real Estate market “Overheated”. In his opinion, the city of is facing a housing affordability crisis, with the average price of a home reaching $640,802 in March, up 11.3 per cent compared to March 2016. Put another way, the first quarter of 2017 saw the average price for a single-detached home increase by 19 per cent as compared to the same quarter last year.
The Victoria Real Estate Board reported the Multiple Listing Service® Home Price Index benchmark value for a single family home in the Victoria Core in March was $790,100 - a 19.1 per cent increase from March 2016.
Despite the presence of strong market fundamentals like employment growth, increased population driven by younger demographics and low mortgage rates, CMHC doesn’t think the market’s price acceleration can be justified by these factors alone.
To assess the states of the housing markets, CMHC looks at four factors: overheating, home price acceleration, overvaluation and overbuilding.
In Victoria, sales-to-new-listings ratio maintained a high level around 80 per cent, which is CMHC’s threshold for an overheated market in which demand has outpaced supply.
“The last quarter of 2016 was dominated by strong sales and low supply which pushed house prices beyond levels that are supported by fundamentals such as income and population growth,” says Bond in a recent report. “For these reasons, we detected increased evidence of overvaluation in the Victoria market.”
Anyone selling real estate in Victoria recognizes the supply challenge. After hitting a nearly 30-year low in the fourth quarter of 2016, low active housing inventory continues through the first quarter of 2017.
Many realtors are experiencing the frustration of a long list of actively interested buyers looking for something…anything in Victoria’s market. Some have even taken to knocking on doors in desirable neighbourhoods and offering a purchase price with no conditions for their clients! We have no data on how successful they have been, but one resident reported that while the offered price was attractive, the realization that he would have to find his family a new place to live led him to decline.
We’ll report more details of this marketing strategy as things develop.
Region's Housing Market Overvalued: CMHC
Times Colonist - April 27th 2017