In 2016, the Victoria real estate market broke records across the board: over 10,000 transactions took place, the most ever since the Board began tracking the number in 1990. Real estate values for single family homes increased 20% overall, with increases ranging as high as 37% in the Victoria core.
The Canadian Housing Market Association (HMA) has warned of the problems arising from real estate price increases and overbuilding across the country, but predictions are hopeful that the market will slow and stabilize by 2018.
I'll be taking a detailed look at the real estate market forecast for Victoria in 2017, as predicted by a number of leaders in the industry. A list of the referenced reports can be found at the end of this article. If you have any questions or would like to discuss the market further, I'd be happy to hear from you. Just drop me a line.
Home Prices Will Likely Drop — A Little Bit
Home prices in Victoria and across much of Canada have been rising faster than general incomes, causing overvaluation in some markets. According to the HMA, imbalance in the Victoria market has been moderate and is possibly already starting to stabilize.
In 2016 sales ranged between 9.8k - 10.2k units, more than 25% over the 2015 count. In 2017 they're expected to fall to between 9.2k - 9.6k sales, and even further to 9.1k - 9.5k in 2018. While relatively lower, these numbers still range well above historical averages.
To go along with those sales numbers, average listing prices in Victoria are expected to range between $605,600 and $614,400 in 2017. By 2018 we may see them rise again to the $625,500 - $634,500 range.
All of this means that 2017 is likely to remain a seller's market, but by 2018 we're likely to see more balanced market conditions.
Keep an eye on the market in Vancouver — if price corrections in real estate there happen early, Victoria may follow, with prices dropping further and sooner. There might also be an increase in Vancouver homeowners selling their homes to move to Victoria, bringing more equity to the city.
Mortgage Rates Will Increase — A Little Bit
The predicted decrease in home sales and prices in 2017 is likely to result in a gradual increase in mortgage rates, which will be most noticeable moving into 2018. CMCH has stated that the posted 5-year mortgage rate can be expected to range between 4.4 - 5.2% in 2017, and 4.5 - 5.7% in 2018.
Mortgages will be further affected by the Government of Canada's new finance measures that were announced last year in October. New eligibility rules for high-ratio insured mortgages were put in place in an attempt to stabilize the housing markets. These new rules mean potential home buyers seeking a high-ratio mortgage may have to meet harsher requirements in a "stress test", to prove that they can still afford their loan if interest rates rise.
It's difficult to predict how these changes will affect the housing market precisely. Buyers may purchase less expensive homes, apply higher down payments, delay their home hunts to gather more funds, or seek out co-signers.
Home Availability Will Improve
The last time Victoria saw a year over year increase in the number of homes for sale was in March of 2013, and a sharp increase in sales last year depleted that supply even further. Luckily, that's expected to wane somewhat in 2017 as new buildings and housing starts slowly catch up to the demand.
Over half of the new homes under construction in the GVA are expected to be found in the core City of Victoria, with another 24% in Langford. The total number of housing starts is predicted to range between 2,300 - 2,600 units in 2017, and 2,100 - 2,500 in 2018. Apartments are especially in demand among buyers under the age of 40 and above the age of 55, and will likely continue to influence new construction.
The Sellers' Market Will Loosen Its Grip
The Victoria real estate market in 2016 was characterized by low supply and increased demand, with sales and prices both climbing in number. As Board President Ara Balabanian has pointed out, "The numbers we saw last year are not the new normal. We know that we are not going to see sales volumes this year that meet or beat last year's record breaking numbers."
The sellers' market of 2016 is expected to continue into 2017, but only for a while. As 2018 nears, the market is expected to see more and more balance as new multi-family and single family homes come onto the resale market — although sales are still expected to remain high above historical annual totals.
Rental Space Is In Demand
Rental vacancy rates in the Greater Victoria Area are expected to remain below the 1% mark for the near future. The CMHC predicts a rise from 0.7% vacancy in 2016, to 0.8% in 2017, with cautious estimates that it may reach 1% by 2018. At the same time average rental rates are expected to rise from $900/month in 2016, to $925/month in 2017, and $950/month in 2018 for one-bedroom apartments. (Two-bedroom apartments are expected to hit $1200/month in 2017 and $1230/month in 2018.)
Victoria's high student population and high percentage of new job positions that are part-time mean that these rental trends are likely to hold steady even while the home buying market moves in other directions.
Promising as things may look, the housing market is never 100% certain and predictions should be used carefully. Victoria's economic outlook, new federal initiatives, and even new presidencies down south can all add a level of uncertainty to dealings.
To quote President Balabanian once more, "It's early in the year to make predictions. Over the last few decades, the historic cycle in Victoria is longer periods of stable activity and price followed by a rapid rise in activity and property values over a relatively short period of time. The coming months will provide us with a better idea of where we are in this cycle."
- Housing Market Outlook: Victoria CMA - Canada Mortgage & Housing Corporation, 2016
- House Prices in Victoria See Sizable Gains in Final Quarter of 2016 - Royal LePage, 2017
- Macdonald Real Estate Group Market Report 2016-17 - Macdonald Realty, 2017
- Most Canadian Housing Markets Overvalued, Price Growth to Slow Through 2018: CMHC Reports - Canada Mortgage & Housing Corporation, 2016
- Provincial Economic Forecast - TD Economics, 2016
- VREB MLS Stats - Victoria Real Estate Board, 2017