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.
*Our mortgage rates have been broadened by adding smaller lenders in addition to the major Canadian banks
While the Prevailing trend since February of this year has been downward in terms of property sales and listing prices, we may be starting to see market conditions flatten out in the short term.
The property absorption ratio which is used to estimate real estate supply and demand is up for the first time in months. Last month's absorption ratio was at 21%, now it has risen back up to 29%. In an ordinary market this might be an indication that markets are rebounding from the bottom since 25% is typically considered a sellers' market. While that may be the case in terms of declining demand, real estate prices are still sliding with a decline of 0.3% - 4.2% since last month depending on property type*, with most property types losing between 1.5% - 2.4% in value since last month.
*Condo's in the Saanich peninsula saw the smallest decline since last month at 0.3%, and townhouses the largest at 4.2%.
Although the timeline for when a market bottom will be reached in terms of price is impossible to say, some are forecasting a housing market correction of around 15% from recent highs, whereas others are anticipating a greater decline. If the more moderate forecast of around 15% is correct, then we may be getting close to a market bottom with most property types having declined between 10.5% and 16.8% since this time last year. However, all of this will continue to be driven by changing inflation rates and interest rate changes. Based on the Consumer Price Index (CPI), Canadian inflation is beginning to see some steady declines from it's recent 8.1% high in June down to 6.9% in September. If this continues and begins to form a trend then the Bank of Canada should be able to slow interest rate rises and may eventually start to reverse these recent increases. A reduction in central bank interest rates would translate into a reduction in mortgage rates making properties both more affordable and more attractive to potential buyers. However, The US Federal Reserve is still remaining hawkish toward inflation with another recent 0.75% interest rate increase. Although the Bank of Canada's slowed increase of 0.5% (down from it's previous 0.75% increase) may act as a vote of confidence for Canadian consumers anticipating slowing rate hikes, potential buyers still need to be aware that the state of our national economy is largely driven by global economic forces. Therefore, it can be safely expected that global inflation will continue to lead the future direction of Canadian housing. If global inflation declines, then it's reasonable to expect lower mortgage rates, greater demand and rising housing prices. If global inflation increases, we should expect higher mortgage rates, lower demand, and a continuing fall in housing prices.
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.
Some tips for potential home buyers and investors going into 2023:
Ask a mortgage broker to secure a rate hold for you. If you are thinking about starting to look for a property at the beginning or middle of next year, securing a mortgage rate hold will be valuable in the event that you come across the perfect property sooner than expected. Rate holds typically last 90-120 days, and allow you to secure today's mortgage rate for 90-120 days in case tomorrow's rates are higher. There's no obligation to take the rate you are given now, and if mortgage rates decline next year, you can still pursue a more competitive rate instead of the one you secure today. This gives you the option, but not the obligation to take today's mortgage rate tomorrow if mortgage rates continue to rise.
Start looking at properties now. If you are planning to start shopping in 6-12 months, it's helpful to start exploring the market now to get a good sense of what's available and what could work for you.
Talk to an agent. It may be early, and you may not be able to start looking until the middle or end of next year, but if you talk to an agent right now they'll be able to help you plan out next steps, and get you set up for when you are ready to start looking.
Opportunities for ordinary people looking to get into their first home, or move up into one of the more affordable homes that are in and around the $1M or less range are still out there, it just takes a bit more diligence, and ideally the support of a committed agent.
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.
In Canada, freehold ownership is the most common way to own a home. Most single-family homes are freehold. Freehold ownership means that you own the land and house outright, with no space co-owned or co-managed with owners of adjacent homes. You are also solely responsible for the maintenance and upkeep of your property, and the property taxes associated with it.
1. VREB Insight:
2. Mortgage Calculator:
3. Mortgage Rate By Bank: