PETER DOLEZAL: Real estate prices in Greater Victoria – sustainable or not?

In attempting to answer this question, we need to consider the key market facts, and other influences affecting our area.

Greater Victoria’s real estate prices continue on a seemingly-unstoppable upward trajectory. Can this really continue?

In attempting to answer this question, we need to consider the key market facts, and other influences affecting our area:

• For a local family to afford a median-priced home of $542,000, Greater Victoria prices now require 8.1 times the median annual income of $67,300. Based on this very high affordability index, we are now considered the least-affordable of the smaller housing markets in Canada.

Nationally, our real estate prices rank third-highest, behind only Vancouver and Toronto.

In the past 12 months the average sale price of a single-family home in our area has increased by a sizzling 27 per cent. Also in the past year, approximately 25 per cent of local property sales were over the listed price.

The Federal government’s recent tightening of mortgage-qualification rules is aimed particularly at the all-important first-time buyer. Given these facts, logic would suggest that our current prices are not sustainable, and should reverse, sooner than later. On the other hand however, a number of factors continue to support rising prices:

• Interest rates, despite a recent but minor upward blip, remain at extremely low levels. Buyers with sufficient income, and a solid credit rating, can easily lock in a five-year mortgage term at an interest rate well below three per cent.

• The B.C. government’s recently-implemented interest-free down payment loan-matching program, up to $37,500 for first-time buyers, has effectively neutralized the Federal government’s tightening initiatives on that segment of the market.

Based on February, 2017’s 675 property sales, and a record-low 1,537 listings, our sales-to-listing ratio stands at an unprecedented high of 44 per cent, higher even than Vancouver’s 33 per cent. A ratio below 15 per cent is generally considered to be a Buyers’ Market, with downward pressure on prices.

A Balanced Market tends to fall in the 15 to 20 per cent range; above 20 per cent is considered to be a Seller’s Market.

Despite new-home construction continuing at a record pace, it will take some time to catch up to the market’s demand for housing.

Demand remains unabated, supported by buyers relocating from the still torrid-priced areas of Vancouver and Toronto, along with a modest increase in foreign purchasers seeking to avoid the 15 per cent surtax now in effect in Greater Vancouver.

With our 44 per cent sales-to-listing ratio, we are clearly in an extreme upward price-pressure position, as evidenced by the huge increases of the past 12 months.

For now, barring further strong Provincial or Federal Government intervention, and/or significant interest-rate increases, it would seem likely that Greater Victoria’s upward price pressure is destined to continue for some time – though likely at much more modest annual rates than those seen in 2016.

Sellers will cheer this likelihood; buyers will continue to scramble to find a suitable home; and our real estate prices will continue their climb toward “bubble” territory, and the inevitable correction. The only question is how long the sellers’ party will last.

 

A retired corporate executive, enjoying post-retirement as an independent Financial Consultant (www.dolezalconsultants.ca), Peter Dolezal is the author of three books, including his most recent, The SMART CANADIAN WEALTH-BUILDER.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

VIDEO: Neighbours help Sidney woman mark 103rd birthday with surprise parade

Barbara Chorlton celebrates her ‘best birthday so far’

Racism is here too, say Victoria’s black community leaders

White Victorians have role to play in combatting systems of oppression, prejudice

Shortage of foreign workers costs Saanich Peninsula berry farmer thousands

Gobind Farms says hiring local has been difficult during pandemic

Pedestrian, cycling overpass now open at McKenzie Interchange

Bridge connects Portage Road, Galloping Goose Regional Trail

VIDEO: B.C. dentist gets grand welcome home after two months in hospital fighting COVID-19

Michael Chow was given a surprise send off by hospital staff and ‘welcome home’ from neighbours

‘Like finding a needle in a haystack’: Ancient arrowhead discovered near Williams Lake

The artifact is believed to be from the Nesikip period between 7,500 BP to 6,000 BP

Indigenous families say their loved ones’ deaths in custody are part of pattern

Nora Martin joins other Indigenous families in calling for a significant shift in policing

PHOTOS: Anti-racism protesters gather in communities across B.C.

More protests are expected through the weekend

Indigenous chief alleges RCMP beat him during arrest that began over expired licence plate

Athabasca Chipewyan Chief Allan Adam calling for independent investigation

‘I’m pissed, I’m outraged’: Federal minister calls out police violence against Indigenous people

Indigenous Minister Marc Miller spoke on recent incidents, including fatal shooting of a B.C. woman

UPDATED: Pair accused of ‘horrific’ assault at Vancouver’s Oppenheimer Park arrested

Police say Jason Tapp, 30, and Nicole Edwards, 33, did not show up to meet their bail supervisor this week

POLL: Are you sending your children back to school this month?

Classrooms looked decidedly different when students headed back to school for the… Continue reading

Most Read