October 28, 2015

Last year at this time we questioned if the Victoria real estate market would move in 2015 from a balance position into a sellers market – a market in which demand outpaces supply. The numbers are in and the answer is a resounding yes.

Canada Mortgage and Housing Corp. has just released their Fall 2015 Housing Outlook for Victoria and notes, “Higher sales levels combined with a declining supply of listings moved the Victoria area resale market into sellers’ conditions through the first eight months of 2015 (Figure 4), particularly in the single-detached home segment, where demand has outpaced supply in some centrally- located municipalities.”

Sales and Prices are Up, Inventory Down:  This year all areas of Victoria have experienced month after month of home sales figures that have continued to exceed last years numbers by about 25%. Hot markets such as Oak Bay have seen median sale prices increase by over 9% over last year with currently only 3 months supply of listing inventory.  In the West Coast community of  Sooke, home sales exceeded last years total numbers by the middle of September with MLS sales up over 46% year to date and with median home prices increasing by over 7%.  However, unlike some core Victoria communities, Sooke is maintaining a good inventory of new and resale homes for buyers to choose from.  CMHC forecasts a continued increase in average home prices in the 2 – 3 % range over the next two years with sales activity to maintain above the 10 year average.

Housing Starts  and the Economy:   CMHC predicts as many as 1,950 total housing starts in the region for 2015, a 50 percent increase over last years starts.  The agency expects that the housing start pace will maintain this level over the next couple of years supported by demand from new and existing residents.  “Demand for new homes in the Victoria area will be supported through the forecast horizon by modest employment and population growth combined with low mortgage interest rates,” says CMHC.

Household Formation: Household formation creates housing demand.  It is a function of migration into Victoria and general population growth – new families and babies. CMHC says, “Victoria is forecast to benefit from rising net migration and household formation, providing a solid groundwork for local housing demand. As more people move to the area and the employment prospects of younger demographics improve, an average of 2,050 households are expected to be added to the region each year for the next five years (Figure 2), a notable increase over the average of 1,200 new households in each of the past five years.”

In summary, the CMHC report confirms what the everyone has been hearing in the news and at the coffee shop – the real estate market is hopping and the forecast remains strong for the next couple of years.

Highlights from the CMHC Victoria Housing Outlook

• „„Housing starts are forecast to total 1,950 units in 2015 to meet growing demand from new residents before stabilizing at 1,900 units in 2016 and 1,875 units in 2017 as mortgage interest rates edge higher.
• „„MLS® sales are expected to maintain a level of activity above the 10-year average in 2016 and 2017 as the economy and employment improve.
• „„The rental vacancy rate is expected to fall from 1.4 per cent in 2015 to 1 per cent in 2016, as rental demand is forecast to exceed new additions to supply.As new apartments are completed in 2017, the vacancy rate is expected to rise slightly to 1.2 per cent.
• „„ Economic fundamentals, including employment and population growth, will support a stable housing market through 2016 and 2017.