A major shift is afoot
The Victoria BC Real Estate Market has significantly shifted from 2020 to 2022. Low rates and low inventory are fuelling a tremendous amount of pressure on prices in Victoria that has accelerated dramatically since the beginning of the covid-19 pandemic. Whether you are considering how to buy a house in BC, moving to Victoria BC on Vancouver Island, or just hoping to learn a little more about how this asset class might be traded in 2022, this is the video for you!
As a Victoria Realtor and BC Realtor, I thought you would appreciate some of my insights into the Canadian Real Estate Market trends and how this will affect Victoria BC and Vancouver Island Homes for Sale. In this video, I discuss the trends and factors that will affect the Victoria Housing market and homes in Victoria BC in the current calendar year. Victoria BC Real Estate has been plagued by slow municipal process and a lack of supply for the last 5 years, but with demand bolstered through the pandemic with low mortgage rates, this problem has been exacerbated.
Here’s the transcript of the video.
Victoria Real Estate Market Outlook for 2022
Today we were talking about the Victoria BC real estate market in my productions for the remainder of 2022.
I am a licensed realtor with Engel & Volkers in Victoria, so this should not be construed as investment advice, these are just my thoughts and opinions based on my experience. Perhaps our recent history is the best place to start since the onset of the pandemic.
Low Inventory & Low Interest Rates
Looking back to the spring of 2020, the government has played their part to put its foot down on interest rates to keep demand supported through all levels of the economy. But, ultimately that has led to more mortgage lending at historically, low rates.
The other thing that has led to low interest rates is low inventory. Really, since the beginning of the pandemic, our inventory in Victoria has been in steady decline. That’s been the case for, you know, more than a decade now. It’s mid-February right now and we have less than 600 active listings in greater victoria. Compare that to a decade ago when we had more than 5,000. Dwindling inventory, basically our absorption rate which is the number of active sales versus active inventory is about 1 to 1 right now. That means everything that’s listed as being sold which is just insane considering that in a balanced market, we might see one sale per, let’s say four homes. So low rates and low inventory. That is the story.
Consider that really we’re living in a negative real rate environment and If mortgage lending is less than 2% and inflation is 5%. Realistically owning assets is paying you right now and it’s paying you to borrow money. That’s part of the reason why we’re seeing such a rush on housing and that may change as the year progresses the Bank of Canada is talking about making a few changes to their overnight rate over the course of the year which of course will affect mortgage lending. I would expect probably four-ish, 25-basis point moves from the bank of Canada which won’t be earth-shattering, but we’ll have an effect on settling demand just a little bit.
Housing Market Predictions for 2022
So my expectation for 2022 is that we will see steady growth but not the kind of growth that we’ve seen over the last two years from thinking about average sale prices in Victoria in 2020, the average sale of a detached home was just over $1,000,000. So far in 2022, we’re over $1.45 million. That’s almost a 50% jump over the span of 2 years. That’s a really extreme change, and I don’t expect that kind of price appreciation to persist. However, I do expect that the trend of low inventory will help support prices here in Victoria.
Bottom line, I’m predicting about a 5 to 7% increase for this calendar year. Now, some of the external factors that could shape how that changes are policy changes, both at a provincial level and federal level. Changes to things like foreign buyers and being able to purchase property in Canada. The Liberals have talked about raising the barrier for insured mortgages from $1 million dollars up to $1.25 million which again, is a demand-side measure.
Another possible policy change could be open bidding which has been discussed. So that’s a change potentially coming across the board in Canada. Currently, we’re living in a closed bidding scenario where people are basically writing their best offer versus other offers that they don’t know exactly where they fall.
So potentially open that up to an auction process. That could certainly change the way that we buy and sell and transact property in BC and in Canada, especially in a low rate and low inventory environment where we’re constantly getting multiple offers on properties, The other thing I wanted to mention is a cooling off period. So the BC financial services authority, which governs real estate here in BC, has talked about introducing, the cooling off period, which basically means you can walk away from a property, even if you wrote an unconditional offer on it. That’s a challenging scenario for me to grasp as it certainly puts the seller in a difficult position. But all the same, those are things that have been talked about and not enforced to this point. How those shape the realities of our market here, in Victoria remains to be seen but one thing should be a constant, which is really healthy demand here in our beautiful capital in a place where we’re not getting enough built for the number of people that are swarming here.
The low inventory is supporting steady price growth, but not insane price growth in an environment where rates still are historically low. That’s my prediction.
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