Greater Victoria’s residential real estate market performance numbers, now in for 2012, provide a few clues to trends we might see in 2013.
The 2012 market, in combination with an increase in inventory, ended on a substantial softening in both sales activity and prices. Understandably, the industry tries to apply the best possible spin on the statistics, but some facts are indisputable.
In December 2012, the most meaningful indicator of price trends – the median price – showed a modest decline.
Single family dwellings, at a year-end median price of $515,000, were 3.8 per cent lower than a year earlier.
Condominiums, at a $259,000 median price, were 4.1 per cent lower, while townhomes, at a median price of $274,000, remained virtually unchanged.
Certainly not a sign of a market collapse, but clearly a softening trend – especially given the 4.7 per cent reduction in the number of unit sales and the coincident increase in the number of listings.
In 2013, what factors could affect residential real estate?
On the positive side, interest rates are almost certain to remain at record low levels. Also, new-construction pricing will benefit from the elimination of the HST in April.
Among the negative factors are not only the uncertainty inherent in the coming provincial election, but also the full-year effect of the Federal government’s tightening of mortgage lending rules which came into effect in mid-2012.
The condominium market in particular, will be adversely affected by the April expiration of the provincial government’s $10,000 bonus incentive program for first-time buyers of newly-constructed units.
Typically, a reduction in first-time buyer activity results in less upgrading by buyers to higher-priced homes.
Perhaps the greatest negative impact on real estate markets not only locally, but throughout Canada, will be the continuation of a tepid North American and European economic recovery throughout 2013. We won’t escape this continuing effect.
On balance, downward pressures on the market will likely prevail. As the year unfolds, we are likely to see buyers gaining greater market power than sellers.
Sellers will have to be very realistic in their pricing or their listing will languish. More than ever, the selection of premium realtors will become very important. Over time this will become easier, as marginal realtors will choose to leave the industry, and fewer replacements are likely to emerge during a challenging market.
Given the negative pressures, continuation of the modest downward trend we saw in 2012 is likely for 2013.
Regardless of the actual market outcome in 2013, the wise market participant, be he buyer, seller, or real estate professional, would be wise to pay close attention to the signals that clearly exist.
A retired corporate executive, enjoying post-retirement as a financial consultant, Peter Dolezal is the author of three books. His most recent, The SMART CANADIAN WEALTH-BUILDER, is now available at Tanner’s Books, and in other bookstores.