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Victoria BC is considered to be one of Canada’s most desirable cities to live in, Victoria’s real estate market remained strong throughout 2014. It mirrored the 2013 market, with a modest increase in activity.
The average residential sale price in Victoria increased 2.9 per cent from 2013, rising to an estimated $$558,500 from last year’s $542,800. Inventory of available properties for sale decreased 11 per cent by December of 2014. The total number of sales at the end of December jumped to 6648 an 12 per cent increase from 2013’s total of 5998.
The 2015 housing market should largely resemble 2014 in regards to price appreciation. It is also expected to remain balanced, not favouring the buyer or the seller, however the listings are on a continue downward curve and that could indicate a move back to a seller’s market in the most desired areas.
Demand from first-time buyers should play a significant role in Victoria’s real estate market in 2015. These buyers often enter the market by purchasing a condominium. There is currently a good selection of condominiums, as well as new projects under development, creating enough product to fulfill high demand. Strata restrictions in older buildings limiting age of owners and pets favour the new buildings which are more liberal with their strata bylaws.
Victoria sees a large number of out of BC buyers choosing to relocate to the city, and this may be enhanced by the recent harsh winter weather and other troubles in areas of the world. Victoria’s market should see an increase in demand as a result.
With its well established tourism industry and thriving technology sector, the economic outlook for Victoria is healthy. The region is expecting a four per cent increase in the average residential sale price as well as a 10 to 12 per cent increase in unit sales. As weather conditions across North America are proving increasingly unpredictable, Victoria stands out as an attractive place to live, and will the lower Canadian dollar tourism is positioned to have a busy year from our USA visitors.
See the recent CMHC Outlook for 2015/2016 and VREB Report with comments in Red
VICTORIA, October 30, 2014 — Housing starts in British Columbia are forecast to total 28,300 homes in 2015 and 29,000 homes in 2016 according to the latest outlook from Canada Mortgage and Housing Corporation (CMHC).
Total housing starts will edge higher as resale market conditions remain balanced and the supply of completed and unabsorbed (unsold) new homes trends lower,” said Carol Frketich, CMHC’s BC Regional Economist. “Housing demand will be supported by employment and population growth, but tempered by gradually rising mortgage interest rates.”
Resale market conditions in the province are projected to remain balanced:
Existing home sales through the Multiple Listings Service (MLS®) are forecast to total 79,200 units in 2015 and 79,300 units in 2016. The average home price is forecast at $566,300 in 2015 and $573,000 in 2016.
Single-detached home starts are expected to total 9,500 starts in 2015 and 9,600 starts in 2016, compared to a projected 9,200 in 2014. Demand for single-detached homes in the province’s urban centers outside of the Lower Mainland is expected to be the driving force behind this rising trend.Resale market conditions in Victoria, Kelowna and Vancouver have shifted with sales growth outpacing listings growth, resulting in rising resale prices.Some of this housing demand is expected to spill over into the new home market as the gap between new and existing home prices narrows. Multiple-family home starts are forecast to maintain a relatively stable level compared to the past decade, although some increase is expected in 2016 as homebuyers shift to less expensive housing types as mortgage interest rates rise. MLS® sales are forecast to moderate in 2015 following a projected 11.6 increase in 2014. In 2016, the level of resales are expected to remain relatively unchanged as rising mortgage interest rates dampen homeownership demand (this trend is now reversing with the evidence of lower mortgage rates being available) and offset some of the positive impacts of stronger employment growth. Balanced resale market conditions are expected to prevail in most housing markets within British Columbia. In Victoria The average MLS® home price is forecast to increase 1.9 per cent in 2014 to reach $490,000, followed by similar increases of 1.5 per cent to $497,500 in 2015 and 1.6 per cent to $505,600 in 2016. These modest increases in resale home prices will be supported by the recent declining trend in the number of homes available for sale, paired with sales
The Victoria area economy is expected to grow at a pace in line with the province, with fundamentals such as employment and population growth supporting a stable housing market. While an aging population will shape the future direction of the housing market, in the short-term,current economic conditions are expected to influence the housing choices of households. A diversified economy will generate moderate job growth through the forecast horizon. Higher consumer spending should translate into growth in the services sector and the economy as a whole. A variety of amenities, a mild climate, educational and employment opportunities are expected to draw a steady stream of people from other parts of BC and Canada, adding to the region’s population. While total employment is expected to hold steady in 2014, growth of 2.2 per cent in 2015 and 1.3 per cent in 2016 is forecast8. This will be accompanied by a reduction of the unemployment rate, already one of the lowest in the province, from 5.3 per cent in 2014 to five per cent by 2016. With several large post-secondary institutions, Victoria’s education sector provides a solid employment base as well as demand for rental housing from a large student population. Start-ups from these institutions and a growing technology sector will also lend support to the region’s labour market. Non-residential investment, which includes transportation infrastructure, commercial development, retail development and renovation, is forecast to generate jobs this year and next. In the first half of 2014, the value of commercial, industrial, government and institutional building permits issued in the Capital Region maintained the elevated level seen during the same period last year, which represented a 63 per cent expansion over the value of projects undertaken in 2012.
A lower Canadian dollar will continue to benefit the tourism sector, which is a major employer in the region both directly and indirectly. In the first eight months of 2014, Victoria International Airport reported a 6.2 per cent increase in total passengers compared with the same period last year, reaching an all-time high in August. The cruise ship industry, which brings a large number of visitors annually, is expected to see a record 235 ship visits in 2015, up from 206 in 2014, according to the Victoria Port Authority. In addition, Victoria’s shipbuilding industry is poised to benefit from several major national and international projects.
Consistent with the view of Canadian economic forecasters, CMHC expects interest rates to remain unchanged until the latter parts of 2015 and then begin to increase gradually. (this is now in a holding pattern as the Bank of Canada reduced its interest rate in January 2015) Gradual increases in mortgage rates from historic lows are not expected to significantly impact housing demand. According to CMHC’s base case scenario for 2014, CMHC expects the one-year mortgage rate to be in the 3.00 to 3.25 per cent range, while the five-year rate is forecast to be within the 5.00 to 5.50 per cent range. (5 year rate is currently 2.89% and is unlikely to go much above 3% for 2015 and into 2016) For 2015, the one-year mortgage rate is expected to be in the 3.20 to 4.00 per cent range, while the five-year rate is forecast to be within the 5.25 to 6.00 per cent range. For 2016, the one-year mortgage rate is expected to be in the 3.70 to 4.60 per cent range, while the five-year rate is forecast to be within the 5.55 to 6.45 per cent range
Growth in housing demand has been consistently strong throughout 2014. While record low mortgage interest rates continue to underpin housing affordability, consumers are demonstrating increased confidence through broad-based spending activity. More robust economic conditions are expected to further boost employment levels through 2015 and further fuel housing demand.
However, a modest increase in interest rates late next year will begin to erode affordability and limit the upward trajectory in home sales. MLS® residential sales through the Victoria Real Estate Board region are forecast to increase a little over 11 per cent to 6,320 units this year and close to 3 per cent to 6,500 units in 2015.
Total active residential listings in Victoria are at their lowest level since 2010. This combined with rising consumer demand has put market conditions on the cusp of a seller’s market. As a result, home prices are once again edging higher. The MLS® Home Price Index (HPI) has advanced at an annual pace of 1 to 1.5 per cent over the last six months. The average annual MLS® residential price is forecast to increase 3.7 per cent to $499,000 this year on the strength of a higher proportion of single-detached homes sold, before increasing a further 2.2 per cent to $510,000 in 2015.
New construction activity has tapered off this year as an elevated inventory of unsold new homes, particularly condominiums, keeps some projects on the drawing board. Total housing starts are forecast to decline 21 per cent this year as the result of a steep decline in multiple starts. In contrast, single-family starts have been relatively stable this year and are on pace to rise 2 per cent this year. The number of completed but unsold new homes reached a peak last spring and is now on the decline. Expect relatively strong consumer demand and a smaller inventory to push total housing starts back to 1,740 units in 2015.